1. What is the Interest Calculation Formula?

The simple interest formula calculates monthly interest for HDFC loans based on principal balance and monthly interest rate.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( P \) — Principal balance (INR)
• \( R \) — Monthly interest rate (annual rate / 12, as decimal)
• \( I \) — Monthly interest amount (INR)

Explanation: The formula calculates the interest portion of your monthly payment by multiplying the principal balance by the monthly interest rate.

3. Importance of Interest Calculation

Details: Understanding how much of your payment goes toward interest helps in financial planning and loan comparison. It shows the true cost of borrowing.

4. Using the Calculator

Tips: Enter principal balance in INR and annual interest rate in percentage. The calculator will compute the monthly interest amount.

5. Frequently Asked Questions (FAQ)

Q1: Is this calculation for simple or compound interest?
A: This calculates simple monthly interest. Most loans use compound interest, but this gives a basic estimate.

Q2: Does this include loan fees or other charges?
A: No, this only calculates the interest portion. Other fees may apply to your actual payment.

Q3: How often should I recalculate my interest?
A: Recalculate whenever your principal balance changes or if your interest rate adjusts.

Q4: Why is my actual payment different from this calculation?
A: Actual payments may include principal reduction, fees, insurance, or other charges not reflected here.

Q5: Can I use this for other types of loans?
A: While the formula is universal, specific loan terms may vary. Always check with your lender for exact calculations.