Interest Calculator

Interest Calculator

Interest is an important component of loan repayment. When one is paying off a loan, they must be aware of how much interest they will pay over the tenure of the loan. Not everyone is familiar with the method of calculating interest using its mathematical formula. A loan interest calculator can help in computing the interest paid over the tenure of any loan quickly and accurately.

What is the Interest?

When a borrower repays a loan, the interest is the amount that the lender charges as a consideration for providing the loan amount. It is usually expressed as a percentage.

What is an Interest Calculator?

An interest amount calculator is an online tool that calculates the interest on a loan. The user has to enter relevant data like loan amount, interest rate, and tenure in the calculator, and the answer is revealed to them within seconds. You can find an interest calculator online for free of cost.

There are some specialized calculator tools like EMI interest calculator that is available online as well. Shriram Finance has developed this interest calculator in rupees to help you plan your finances when you are applying for a loan in India.

How will Interest Calculators Work?

A loan interest rate calculator processes the loan-related data entered by the user to find out the estimated cost of borrowing the loan. It computes the interest paid on the loan based on the amount, tenure, and interest rate of the loan. EMI interest calculators compute the EMI amount and the total repayment amount of the loan as well.

Formula for Interest Calculator

An interest rate calculator computes interest on loans using the interest rate calculator formula. It calculates the interest based on the loan amount, the interest rate, and the duration of the loan. Let's understand how the calculation is done.

1. Simple Interest

The simple interest rate formula is as follows:

A = P (1+rt) where,

A = Total repayment amount of the loan

P= Principal amount

r = Interest rate

t = Duration of the loan

Example:

A borrower applies for a loan of ₹1,00,000 from a bank or NBFC. The interest rate is 12% p.a and the loan is to be repaid in 2 years. Putting these figures in the formula above,

A = ₹1,00,000 (1+0.12*2)

= ₹1,24,000

Out of this, ₹1,00,000 is the principal amount, so ₹24,000 is the interest payable on the loan.

You can put these figures in the interest return calculator to double-check the answer. This was a yearly calculation, but you can use the same formula to find monthly or daily interest too. A monthly interest calculator or a daily loan interest calculator can also be used.

2. Compound Interest

Here's the formula used for computing compound interest:

A = P(1 + r/n)nt where,

A = Total repayment amount of the loan

P = Principal amount

r = interest rate

t = Duration of the loan

n = number of compounding periods per unit of time

Let's calculate the compound interest for the same example as above assuming that the interest compounds every year.

A = ₹1,00,000 (1+0.12/2)2*1

= ₹ 1,25,440

We know that ₹1,00,000 is the principal amount, so ₹25,440 is the interest payable on the loan. A yearly interest calculator can complete this calculation within just a few seconds.

3. EMI Interest

We can also find out the interest component of an EMI using the EMI formula.

EMI = P * r (1+r)n / (1+r)n -1

Where,

P = Principal amount

r = Monthly Interest rate

n = Duration of the loan in months

Let's compute the EMI for the same loan mentioned above. A monthly to annual interest rate calculator can be used to convert the annual interest rate into a monthly rate.

After putting the values in the formula we get that,

EMI = ₹1,00,000 * 0.01(1+0.01)24 / (1+0.01)24 -1

= ₹4,707

When you put the values in an EMI and interest calculator, it will also compute the total interest amount. In this example, it is ₹12,968.

Similarly, you can use an overdraft interest rate calculator to compute the interest charged by banks on the overdraft provided. You can also find other types of calculators like reducing interest calculators.

How To Use Interest Calculators?

Follow these two simple steps to compute your interest amount using an interest calculator:

Step 1: Enter the amount, interest rate, and duration of your loan into the blank columns of the interest calculator.

Step 2: Check whether all details are correct and click on 'Submit'.

Within a few seconds, the interest percentage calculator will reveal the results on the screen.

Benefits of Interest Calculators

Here are the major benefits of using an interest return calculator to compute interest.

• An interest calculator computes interest on a loan within just a few seconds.
• It provides accurate answers every time, unlike manual calculations.
• It is available for free online. You can find an interest calculator online with a simple search.

How Can Interest Calculator Help You?

An interest rate calculator can be helpful to borrowers in many ways. Here are a few examples of how it can be used.

Calculation of Simple Interest

Simple interest is calculated by multiplying the loan amount with a flat interest rate and a loan tenure. The interest is calculated only on the principal amount. The borrower does not have to pay interest on interest. Simple interest is easy to calculate manually using a simple interest calculation formula.

Calculation of Compound Interest

While computing compound interest, the interest amount is added to the loan's principal. Because of this, the interest on the next installment is calculated on the principal amount plus the accumulated interest. The borrower ends up paying 'interest on interest' under this system. The computation of compound interest is trickier than simple interest. It's easier to use a money interest calculator for accurate results.

Calculation of Interest on Loans With Various Tenures

This tool can help you decide the ideal tenure of your loan. A yearly interest calculator can compute how much interest you will pay per year. Similarly, you can use a quarterly interest calculator to find the interest payment per quarter and a weekly interest calculator for loans that compound weekly. Even a daily interest calculator can be used to find the interest per day or an interest per month calculator can be used for monthly interest calculation.

Comparison of Different Loans

If you have to choose between loans of different amounts and tenures, you can use the annual interest rate calculator to compare the options. This can help in selecting the best loan for your needs. As these total interest calculators are free, they can be used as many times as needed to compare the loans offered by multiple banks and financial institutions.

Advantages of Using Interest Calculators

Using a per annum interest calculator can be very beneficial to users. Here are some major benefits of using an interest rate calculator.

Free of Cost

Loan interest calculators are available for free online. You can simply visit Shriram Finance's website and use the tool as many times as needed without paying any charge.

Quick Results

EMI interest calculators are automated tools that provide the interest amount, principal amount, EMI amount, and the total repayment amount within just a few seconds. A daily interest calculator can also be found for daily interest calculations. If you decide to calculate it manually, it will take a lot more time.

Accuracy

Loan interest rate calculators help you find accurate interest amounts as well. If the computation is done manually, there may be a risk of errors.

User-friendly

Shriram Finance's interest rate per annum calculator can be used by even those who are not too familiar with the technology. You just have to put the interest rate, the period, and the loan amount in the blank columns of the calculator to get quick answers.

Conclusion

Calculate interest rates online anytime you need by using this easy-to-use calculator. This tool makes the computation of simple interest, compound interest, and the interest component included in your monthly EMI easy. Use the Shriram Finance interest calculator, to get accurate results, and manage your finances in a more effective manner.