How To Calculate
Education Loan EMI?

EMI calculation

EMI (Equated Monthly Instalment) is a fixed monthly instalment that a borrower must start paying after the moratorium period ends. EMI depends on different factors such as the principle amount, interest rate, course duration, etc. It can be calculated simply by using Credenc EMI Calculator-

Calculation formula description

EMI is calculated keeping the factors in mind

• Loan Amount – P
• Interest Rate – r (per month)
  where, r (per month) = R (rate of interest per annum)/(12*100)
• Repayment period – t (months)
• Course Duration – d (months)
• Moratorium Period – m (months)
• Interest paid during the course and moratorium period – P1 (if any)
  P1 = P.r.(d+m)
  
  
  1. CASE (A): When borrower pays whole amount of interest (P1) ,Total Principal – P2
     P2=P+P1
  
  
  
  2. CASE (B) : When the borrower pays a part of P1, Total Principal – P3
     P3 = P + (remaining unpaid part of P1)

• Formula for calculation of EMI
  

  EMI=P .r . (1+r)^t/((1+r)^t-1)
  
  Where, MonthlyInterestPayment=P.r= P1/((d+m) )

1. The borrower pays no interest during the course and moratorium period, then P = loan amount
2. The borrower pays the whole amount of interest during the course and moratorium period,then P = P2
3. The borrower pays a part of interest during the course and moratorium period, then P = P3

Factors for calculation of education loan EMI

• PRINCIPAL AMOUNT (P): The principal amount is the total loan amount that the applicant avails from the bank. Higher the principal amount, higher will be the EMI.
• INTEREST RATE (r): The rate of interest is the rate at which the bank/NBFC charges interest on the principal amount. It is directly proportional to the EMI, which means as we increase the rate of interest, the EMI amount also increases.
• MORATORIUM PERIOD (m): The moratorium period is also known as EMI holiday. It is the time period between the completion of the course and the time when the applicant gets a job/ 6 months to 1 year (whichever is earlier). The EMI amount is independent of the moratorium i.e., the EMI period remains unchanged even if the moratorium period changes.
• COURSE DURATION (d): The course duration is the duration for how long the course continues for which the borrower has availed a loan. EMI is also independent of the course duration which means the EMI doesn’t change with course duration.
• REPAYMENT PERIOD (t): The repayment period starts after the moratorium period ends. It is inversely proportional to the EMI, which means longer the repayment period, lesser will be the EMI.
• WHETHER OR NOT THE APPLICANT WILL PAY INTEREST DURING THE COURSE: If the borrower decides to pay interest during the course and moratorium period, then the EMI after the moratorium periods is lower as compared to when the borrower doesn’t pay interest during the course and moratorium period.