Gold Loan EMI can be calculated in three ways:-
• By using mathematical formula, EMI= [ P x R X (1 + R) ^ N] / [ (1 + R) ^N – 1]
Where, P is the principal loan amount, R is the rate of interest per month and N is the number of monthly installments. If the rate of interest per annum is 12%, then the interest rate per month will be 1% (12%/12). For instance, you apply for a Gold Loan of ₹ 1 lakh from the bank at 12% interest rate with tenure of 12 months. In this case, r = 12%/12 = 1% or 0.01 Therefore, EMI = [1,00,000*0.01* (1+0.01)^12]/[(1+0.01)^12-1] = ₹ 8,885 This means you will have to pay ₹ 8,885 for 12 months to repay the entire loan. The total amount you will pay is ₹  1,06,620 (8,885*12), which includes ₹ 6,620 of interest on ₹ 1,00,000 loan amount for 1 year.
• By using Excel Spreadsheet, applying PMT function, the periodic payments required to pay off the loan with interest over a fixed tenure can be calculated.
The syntax of the function is as follows: PMT ( rate, period, pv, [fv], [type] ), where rate is the interest rate per period, period is the number of periods over which the loan has to be repaid, pv is the present value of the loan, fv is the future value of loan and type specifies if the payment is made at the beginning or end of the period. Let’s take the above illustration again and apply the PMT function, which will look like, PMT(0.12/12, 12, 100000), where the period considered is months and interest rate is also taken on monthly basis. The last two arguments can be safely omitted. Unit Chefs provides an easy and convenient way to calculate and convert between the various units of measurement and within different systems. This formula will give you a result of ₹ 8,884.88, in red or negative which denotes cash outflow.
• By using EMI calculators, you can calculate your EMI instantly and conveniently, by correctly entering the following details of your loan:
1. Loan Amount: First of all, enter the Gold Loan amount you wish to borrow.
2. Interest Rate: Then enter the Interest rate that is charged on your loan. This rate is monthly reducing balance.
3. Tenure:  insert the number of months for what period you want Gold Loan.
Let’s take the above illustration once again and calculate EMI using EMI calculator: The EMI calculator gives us the following result:- The amortization schedule of the above loan is as under:- Note: It is assumed that the first installment of loan is paid in July 2017.

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## CMT Level 1 Study Material

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