Program to Calculate EMI in Java

In this article, we will see. how to calculate EMI in Java for a loan or financial investment. EMI is a fixed amount paid by a borrower to a lender at a specified date each calendar month. It consists of both the principal amount and the interest on the loan or investment. Calculating EMI is a common financial computation used in the banking and finance industries.

Let’s dive in.

Problem Statement

Given the principal amount (the initial loan amount or investment), the annual interest rate, and the loan tenure (in months), we need to calculate the monthly EMI. The input will include these three parameters, and the output should be the monthly EMI. For Example:

Input:

• Principal amount: Rs 100,000
• Annual interest rate: 6% (0.06 as a decimal)
• Loan tenure (in months): 60 months

Output:

Monthly EMI: Rs 1933.28 (rounded to two decimal places)

Solution

Before we delve into the solutions, let’s briefly discuss the mathematical concept and formula used to calculate EMI.

EMI Formula With Example

EMI Formula: The formula to calculate EMI for a loan or investment is based on the concept of the time value of money. The formula is as follows:

Where:

• EMI is the Equated Monthly Installment.
• P is the principal amount.
• r is the monthly interest rate (annual rate divided by 12).
• t is the total number of monthly installments (loan tenure in months).

Let’s calculate the Equated Monthly Installment (EMI) for a loan with an example. Consider

• Loan amount: ₹10,000
• Annual interest rate: 5%
• Loan tenure: 3 years (36 months)

Here’s how you can calculate the EMI :

1. Convert the annual interest rate to a monthly rate: Monthly Interest Rate (r) = (Annual Interest Rate / 12) / 100 = (5 / 12) / 100 = 0.004167 (approximately)
2. Calculate (1 + r)^n: (1 + r)^n = (1 + 0.004167)^36 ≈ 1.169858
3. Now, use the EMI formula: EMI = [P * r * (1 + r)^n] / [(1 + r)^n – 1] EMI = [₹10,000 * 0.004167 * 1.169858] / [1.169858 – 1]
4. Calculate the EMI in Indian Rupees: EMI ≈ [₹41.67 * 1,169.858] / [0.169858] EMI ≈ ₹2,900.68 (rounded to the nearest paisa)

So, the Equated Monthly Installment (EMI) for a ₹10,000 loan with a 5% annual interest rate and a loan tenure of 3 years (36 months) is approximately ₹2,900.68. This is the fixed monthly payment you would need to make in Indian Rupees to repay the loan over the specified period.

Algorithm

• Accept the principal amount, annual interest rate, and loan tenure (in months) as input.
• Calculate the monthly interest rate (r) by dividing the annual interest rate by 12.
• Use the EMI formula to calculate the monthly EMI.
• Display the calculated monthly EMI.

Java Code To Calculate EMI

// EMI Calculator in Java

import java.util.Scanner;

public class CalculateEMI {
    public static void main(String[] args) {
        // Create a Scanner for user input
        Scanner scanner = new Scanner(System.in);

        // Prompt the user to enter the principal amount
        System.out.print("Enter the principal amount: Rs ");
        double principalAmount = scanner.nextDouble();

        // Prompt the user to enter the annual interest rate (in decimal form)
        System.out.print("Enter the annual interest rate (in decimal form): ");
        double annualInterestRate = scanner.nextDouble();

        // Prompt the user to enter the loan tenure (in months)
        System.out.print("Enter the loan tenure (in months): ");
        int loanTenureMonths = scanner.nextInt();

        // Calculate the monthly interest rate (r)
        double monthlyInterestRate = annualInterestRate / 12;

        // Calculate the EMI using the formula
        double emi = (principalAmount * monthlyInterestRate * Math.pow((1 + monthlyInterestRate), loanTenureMonths))
                    / (Math.pow((1 + monthlyInterestRate), loanTenureMonths) - 1);

        // Display the calculated monthly EMI
        System.out.printf("Monthly EMI: Rs %.2f%n", emi);
        
        // Close the scanner
        scanner.close();
    }
}

Output

Enter the principal amount: Rs 100000
Enter the annual interest rate (in decimal form): 0.06
Enter the loan tenure (in months): 60
Monthly EMI: Rs 1933.28

Key Takeaways

• EMI (Equated Monthly Installment) is a fixed monthly payment made by a borrower to a lender, including both principal and interest components.
• The EMI calculation formula considers the principal amount, the monthly interest rate, and the loan tenure (in months).

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