Borrowers can calculate the interest on personal loans in 5 ways - online calculator, excel, formula, etc.
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5 Ways to Calculate Interest on Personal Loan

5 Ways to Calculate Interest on Personal Loan

posted on 2020-05-30 07:44:24 by Admin

How to Calculate Interest on Personal Loan - Formula, Calculator, EMI

Personal Loan is a quick credit source to meet your financial needs. It does not require collateral and can be availed at a low-interest rate. So, as a responsible borrower, you must calculate interest on a personal loan to check if the lender is charging fair EMI on the loan. Also, it will help you to know how personal loan interest amount is calculated.

The interest rate on personal loans consists of 3 main components that are principal amount, rate, and repayment tenure. In the article below, we have mentioned Personal loan interest calculation  via excel, manual formula, online EMI calculator, etc.

5 Ways to Calculate Personal Loan Interest Amount

You can calculate interest on personal loans in numerous ways, all will give you the same result. Whichever method is suitable, you can use it to calculate the loan amount.

#1. Personal Loan EMI Calculator

Calculating interest on personal loans is easy via an online EMI calculator. To use this, you just need three data points ie. loan amount, rate of interest, and time period. Within seconds you can know the total interest on the loan and the Equated Monthly Interest.

This method is useful to compare multiple loan plans. In order to get the best personal loan for you, you must check the cost of the credit and monthly EMIs. This way you can plan your finances well.

Let’s Say, You take a loan of 3.5 Lakh for 3 years with an interest rate of 12.75%. Then, you need to know two important parameters ie. total interest rate and the monthly EMI. With the calculator you will get to know the results as such:


Principal Amount

Rs. 350000




3 Years or 36 Months

Interest Rate

Rs. 73028.15

Total Loan Value

Rs. 423028.15


Rs. 11750.78


Steps to use the Online Personal Loan EMI Calculator

  • Choose the “personal loan” tab in the loan EMI Calculator.




  • Thereafter set the loan amount, interest rate, and loan period.




  • Immediately on entering the details, you can check the EMI Amount and Interest Payable




What is the Amortization Table? How to use it?

Along with EMI, you can check the amortization table. It shows you the complete schedule of monthly loan payments. In the first two rows, it represents the loan amount and interest you need to pay each month. Also, you can check the outstanding amount and percentage of interest paid. Check how to use the Amortization table.

  • You will see yearly rows mentioning the Principal, Interest, Total Paid, and % loan paid.
  • If you want to see a monthly breakup, then click on the “+” sign adjacent to each year row.




  • The table will expand to show the monthly breakup.




In the given example, you can check that in the month of May, you need to pay EMI of Rs. 11750.78. Which is the monthly % of loan amount and interest you need to give.

EMI= Principal + Interest Rate = Rs 8117.37 + Rs. 3633.41 = Rs. 11750.78

You can use EMI Calculator for free unlimited times to calculate personal loan interest and EMI for the better planning of the credits.

#2. Personal Loan Interest Calculator - Excel

Another method to calculate Interest on personal loans is an excel spreadsheet. With integrated formulas, you just need valid values to get the result. Before applying for a personal loan, you can compare different interest amount on various plans.

How is personal loan calculated via Excel?

  • Open the Spreadsheet and use the “PMT” formula.
  • Click on any cell and write “=PMT”. You will see three parameters: rate, nper, and pv.
  • Under "rate" enter, either monthly interest rate or total interest rate/12.
  • In nper, enter the loan period in months. Last enter loan amount under pv.



  • Click on enter, you will see an amount in negative which will show cash outflow.



In this example, the loan amount is taken as 3.5 Lakhs with an interest rate of 12.75% and tenure of 3 Years. Upon entering all the values the interest will result in red color showing the total interest amount you need to pay.

#3. Personal Loan Interest Calculator - Formula

In case you do not have access to a spreadsheet or the online calculator, then you can use the basic calculator. For this, you just need a formula and 3 basic values.

“EMI = [P x R x (1+R)^N]/[(1+R)^N-1]”

In this formula, just put the loan amount in place of “P”, Monthly interest rate in “R”, and total tenure in months in “N”.

EMI= Equated Monthly Interest

P= Principal Amount

R= Monthly Rate of Interest

N = Loan Tenure


#4. EMI Calculation on Flat Rate of Interest

Your bank may apply a reduced or flat interest rate. In the flat interest rate, you have to pay the same interest until the loan tenure on the entire principal amount.

How to Calculate Personal Amount on a Flat Interest Rate?

Use simple formula Interest= P*R*T/100

Monthly Interest= (Interest + Principal)/ Tenure in months

#5. EMI Calculation on Reducing Rate of Interest

In the Reduced rate, the interest is calculated on the outstanding loan remaining after each monthly payment. Thus, the interest amount goes down with time.

Check Out: How to improve Credit Score from 600 to 750

Usually, banks apply a reduced rate of Interest for the clients. In the online EMI Calculator, you can find the results based on reducing the rate of interest.


Principal Amount

Rs. 350000




3 Years

EMI on Reduced Rate

Rs 11750

EMI on flat Rate

Rs 13441

Total Saving on Loan

Rs 60875


Key Points to Know About Your Personal Loan Amount

Here are some important things that you must know before applying for the personal loan.

Factors Affecting Interest on Personal Loan

Generally, the Reserve Bank of India decides the interest rate on the loans. However, different banks have different interest rates as per their policies. Some factors which affect the interest rate are market conditions, government announcements, and other policies. Other factors include borrower salary, age, employment, current organization, credit score, repayment capacity, loan amount, repayment duration, etc.

Important Terms Related to Personal Loan Interest

The terms that are primarily associated with loans are principal amount, interest rate, and the period.

  • Principal: This is the total credit that you need from your lender. The loan amount that you will get depends upon your salary and the plans by the lender.
  • Interest Rate: % age of amount you need to pay to borrow the money. You can negotiate the rate to reduce your monthly EMI.
  • Repayment Period: This is the period within which you need to repay the loan.


As you now know how to calculate EMI and interest on a personal loan, you can easily manage your finances. Along with the lender, also run some calculations to check if you are fairly charged. When you are done with research and analysis, then you can finally apply for the loan. Now as days, you can get loan approval in four minutes and disbursal in 24 hours.


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