This document will let you to learn how to manually calculate loan E.M.I. (Equal Monthly Installment) manually without using any sort of excel built-in functions like PMT, etc.

1. In recent times, credit decisions are getting much easier. However, for this we should
be thankful to the Microsoft excel for providing us various complex functions that can
be very much helpful in calculating various credit functions like Loan EMIs, etc. But
being a credit analyst, a person should be fully aware or should know about how to
manually calculate loan “EMI” or “Equal monthly installments”.
In this post, you will learn about how to manually calculate loan EMI without taking
help from any sort of pre-defined policy sheet like debt burden sheet. This is very
simple for any person who is supposed to be beginner in the field of Credit Risk
Management. After reading this post, anyone can measure his or her loan EMI-Equal
monthly installment. The only thing he or she must have is the interest rate, which can
enquire quite easily from the lending bank or sales person when applying for the loan.
In fact, it is also mentioned in the loan documents like “legal finance agreement”,
therefore at the time of applying for the loan and before signing of the “legal finance
agreement”, you can see the markup rate or you can interest rate. There are many
terms which can be used on behalf of markup rate or interest rate. However, most of
the banks are using the term “effective APR also known as effective Annualized
percentage rate” on behalf of interest rate for the whole year.
So, let’s start, how you can manually calculate your loan “EMI” equal monthly
installment. This can easily done through manual table calculate or you can use any
sort of excel based worksheet for the calculation.
Here in this particular example we are using the following data for calculating manual
EMI:Effective APR for the whole year = 25%
Loan Tenor = 1 year or 12 months
Requested or Desired Loan Amount = $100,000.00 or $0.1(Millions)
So in below steps you will learn about how to manually calculate loan EMI based
upon the above mentioned information or data.
Step #1
At the first step, you need to divide the interest by 12 months and then further divide it
by 100 in order to get value in percentage.
Therefore, we will divide
25/12/100= 0.020833
Step 2
At the second step, you need to add / plus 1 in the value you have obtained in the
previous step. Then put the number of tenor in the power. This equation can be look
like
(1+0.020833)^12

2. However, you can also calculate the power manually or the above equation manually.
It is not such difficult task to do. Just requires a mathematical calculation. Therefore,
in order to calculate the power factor manually. You need to multiply the value obtain
by adding 1 to the number of times equal to the values of total tenor or the power
value. For the above mentioned equation, the manual calculation of power factor can
be like this
(1+0.020833)=1.020833
Then, in order to calculate the power factor, you need to multiply the above value by
number of times equal to your tenor.
1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*1.020833*
The answer will be = 1.280732
Step 3
Now, in this particular step you need to subtract 1 from the above mentioned value.
Then you need to further multiply the value obtained in the last of step #2 with value
obtained in the step #1 and then divide the answer from the value you have obtained
at the start of current step i.e. step #3. The equation can be like this
1.280732-1=0.280732
Then further you need to multiply and divide
1.280732*0.020833/0.280732=0.095044
Step #4
In the last step, you need to multiply the value obtained in the previous step with the
loan amount. Here we go, you have manually calculated your EMI amount.
100,000*0.095044=9504
You monthly installment is $9504. Enjoy!