Year | Principal (A) | Interest (B) | Total Payment (A + B) |
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Understanding the formula to calculate EMI on a Business Loan is essential for entrepreneurs to manage their loan repayments efficiently.
EMI = (P * r * (1 + r)^n) / ((1 + r)^n - 1)In the equation,
P | stands for the principal loan sum |
r | represents the monthly interest rate |
n | denotes the overall quantity of monthly payments |
Suppose you are considering a business loan of INR 4,00,000 with an interest rate of 12% per annum for a tenure of 5 years (60 months). You can use the formula as follows:
EMI = (400000 * 0.01 * (1 + 0.01)^60) / ((1 + 0.01)^60 - 1)
EMI ≈ INR 8897.77
This formula alone can be cumbersome and prone to errors, especially for complex loan structures. Embracing an EMI calculator streamlines the process, providing businesses with accurate repayment estimates and facilitating effective cash flow management and budgeting.
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