Video instructions and help with filling out and completing Which Form 2220 Installment

Instructions and Help about Which Form 2220 Installment

Hello friends calculation of equal monthly installments whenever a person is raising loan which has a fixed maturity he has the following option to repay that loan one option could be a repayment of the loan in one lump sum along with interest due on the loan so he makes one payment at end of the maturity and that payment includes principal as well as interest second option he can repay the principal at the end of the maturity period and in the meanwhile he continues to pay interest periodically when to the third option he can repay the loan in equated installments and that installment includes interest due till that time plus a part of the principal so here we are focusing on the third option that is equated instalments how to calculate equated installment very often in the mortgage loan in the home loans in the house loan this method is followed by banks so this we will do by way of an example so here is our example the amount of loan is rupees 10 lakh the repayment period is six months in monthly installments rate of interest is 12% we shall calculate EMI by using a mathematical formula and also by using a table method so here we are calculating EMI by using two different methods first of all we shall calculate it by using a mathematical formula so EMI equated monthly installment is equal to principal into rate of interest in Brecht 1 + R raised to power n divided by 1 + R raised to power n minus 1 so this is our formula which we are going to use to calculate EMI in this case P stands for the principal amount that is the loan amount R is rate of interest per installment period so here interest is 12% number of installments is a 6 so per installment period interest is 2% n is number of installments now we can substitute the values in that formula so we are substituting the value so principal is 10 lakh rate of interest is 2% which will be Express as zero point two zero two one plus R so one plus rate of interest that is one point zero 2 raised to power 6 divided by one point is zero 2 raised to power 6 minus one now we shall simplify this so here we have the values so this portion gives us the value 20 thousand this portion gives the value one point one two six one six this portion gives the value one point one two six one six minus one now we can simplify it further so here we have the value and finally here we have the amount of installment so to repay this loan of rupees 10 lakh at 12% and test in 6 monthly installment so every installment has to be of an amount of rupees one lakh 78526 so we can test this by using that table method now we shall take into consideration this amount of equated installment and then we shall make use we shall calculate the detailed working so here we have month's amount of EMI interest where that has become due till that period amount of is principal that would be repaid through that monthly installment and outstanding balance of the loan so we have a loan of rupees 10 lakh at the end of first month one lakh 78526 rupees shall be paid on this interest is twenty thousand so on ten lakh at two percent in test is twenty thousand so out of this twenty thousand is used for interest and remaining prima motifs for principal so this is interest paid this is amount of principal paid so remaining balance is 8 lakh forty one thousand four hundred seventy four now at the end of second month so this is the amount of equated installment on this amount of rupees 8 lakh forty one thousand four seventy four at two percent interest comes out to this much so amount of installment minus interest this is the amount of principle that would be paid hence the remaining amount she'll be six legs seventy nine thousand seven hundred seventy seven at end of third month so this is the amount of installment on this amount at two percent this is amount of interest so out of this this amount is appropriated as interest the remaining period will go to repayment of principal so out of this principal when we deduct this amount we get this balance for next month for fourth month this is the amount of EMI on this amount at 2% this is rate of interest so this amount out of this is used for interest payment and ballast amount this one is used for repayment of principal out of this when we deduct this amount so we get the balance principle 3 lakh forty six thousand six hundred eighteen at end of fifth month this is amount of installment on this amount this is amount of is interest so out of total amount of installment paid this amount is used for interest payment and balance amount it is used for payment of principal then at the end of fifth month the principal remains this much out of this no for the six months this is the amount of installment on this amount this is the amount of intense to be charged so balanced mode will go as repayment of principal so at the end of six months the principal loan will be del so this way the calculation can be verified now these are two different methods through which we can calculate EMI