Loan, Mortgage and Investment Calculators Explained
What EMI actually means, why early payments are almost all interest, and which figure to compare when choosing a loan.
Every amortising loan in the world — mortgage, car, personal, student — uses the same formula. Learn it once and every loan comparison gets easier.
The formula
Monthly payment = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1), where P is the principal, r the monthly interest rate, and n the number of months. In India this is called EMI — Equated Monthly Instalment — but the mathematics is identical everywhere.
Try it: Mortgage · Home loan EMI · Car loan · Personal loan · Student loan · Generic EMI.
Why your early payments barely touch the principal
Interest is charged on the outstanding balance, which is highest at the start. On a 30-year mortgage at 6.5%, roughly 70% of your first year goes to interest — and it takes about 18 years before you have repaid half the principal, despite being halfway through the payments.
See it laid out year by year: Amortization Calculator.
This is also why early overpayments are worth so much more than late ones. An extra payment goes entirely to principal, removing that amount from every future interest calculation.
Compare the total, not the monthly payment
This is the single most useful habit. Dealers and lenders make monthly payments look small by stretching the term. A seven-year car loan has a comfortable payment and costs dramatically more.
On a $350,000 mortgage, moving from 6.5% to 7.5% adds about $235 a month — and roughly $84,000 across the full term. That is usually worth more than negotiating the same amount off the purchase price.
Credit cards work differently
Minimum payments are typically set at 1–3% of the balance, barely above the interest charge. At that rate a balance can take decades to clear and cost more in interest than the original spending.
Credit Card Payoff Calculator — increase the monthly payment slightly and watch the timeline collapse. It is the most persuasive argument for paying more than the minimum.
The other direction: saving
Compounding rewards time more than amount. Starting ten years earlier usually beats contributing considerably more later.
- Compound Interest — with regular contributions.
- SIP and Lumpsum.
- Retirement — including what a 4% withdrawal rate would provide.
- Savings Goal — how much per month to hit a target.
Tax and regional
UAE VAT (5%) · UAE gratuity · India GST · US sales tax · US self-employment tax · Capital gains.
One removal trap worth memorising: to strip 5% VAT from an inclusive price you divide by 1.05. Subtracting 5% from the gross gives the wrong answer, and it is a very common error on invoices.
What these cannot tell you
The arithmetic is exact. The assumptions are not. None of these model fees, insurance, property tax, rule changes, or your particular circumstances. They are planning estimates — good ones, but not advice. For anything consequential, speak to someone qualified.