How to Make EMI For Loan in SQL Server

Introduction

Here I will explain how to make an Equated Monthly Installment (EMI) for your loan amount in SQL Server using a Stored Procedure.

EMI

An Equated Monthly Installment (EMI) is a monthly basis repayment of the loan amount taken. A loan amount, whether it is a home loan, a car loan or a personal loan, is paid back using a series of monthly payments. The monthly payment is in the form of postdated cheques drawn in the favor of the lender. EMIs are paid until the total amount due is paid up. The EMI is directly proportional to the loan amount taken and inversely proportional to the time period. That is, if the loan amount increases then the EMI amount increases too and if the time period increases then the EMI amount decreases. It does not mean you must pay less but rather the monthly amount is decreased since the total number of months for repayment has increased.

How to calculate the EMI?

EMI is made up of two variable components, the principal amount and the interest rate. The EMI is fixed but not the components. The component of the interest amount is higher in the initial years and decreases over the years. The component of the principal amount is lower in the initial years and increases over the years.

For this reason, if you consider pre-payment, you should do it in the early years since you save on the interest rate.

Illustration: Ashwin takes out a loan of Rs 1 lacs for 1 year with a flat interest rate of 20%. The EMI he must pay is Rs 10,000.



Here is the Solution:

Create PROC [dbo].[Sp_GetEmi]
@LoanAmount decimal(18,2),
@InterestRate decimal(18,2),
@LoanPeriod Int,
@StartPaymentDate DATETIME
AS
BEGIN
SET NOCOUNT ON

DECLARE

@Payment decimal(12,2),
@Period FLOAT,
@Payment2 decimal(12,2),
@TotalPayment decimal(12,2),
@FinanceCharges FLOAT,
@CompoundingPeriod FLOAT,
@CompoundingInterest FLOAT,
@CurrentBalance decimal(12,2),
@Principal FLOAT,
@Interest FLOAT,
@LoanPaymentEndDate DATETIME,
@LoanPayDate DATETIME,
@LoanDueDate DATETIME



SET @InterestRate = @InterestRate/100

SET @CompoundingPeriod = 12


/*** END USER VARIABLES ***/

SET @CompoundingInterest = @InterestRate/@CompoundingPeriod

SET @Payment = ROUND((((@InterestRate/12) * @LoanAmount)/(1- ( POWER( (1 + (@InterestRate/12)),(-1 * @LoanPeriod) )))),2)

SET @TotalPayment = @Payment * @LoanPeriod

SET @FinanceCharges = @TotalPayment - @LoanAmount

IF EXISTS(SELECT object_id FROM tempdb.sys.objects WHERE name LIKE '#EMI%')

BEGIN

DROP TABLE #EMI

END

/*** IT'S A TEMPORERY TABLE ***/

CREATE TABLE #EMI(

 PERIOD INT

,PAYDATE SMALLDATETIME

,PAYMENT decimal(12,2)

,CURRENT_BALANCE decimal(12,2)

,INTEREST decimal(12,2)

,PRINCIPAL decimal(12,2)

)

SET @Period = 1

SET @LoanPaymentEndDate = DATEADD(month,@LoanPeriod,@StartPaymentDate)

SET @LoanPayDate = @StartPaymentDate

BEGIN

WHILE (@Period < = @LoanPeriod)

BEGIN

SET @CurrentBalance = ROUND (@LoanAmount * POWER( (1+ @CompoundingInterest) , @Period ) - ( (ROUND(@Payment,2)/@CompoundingInterest) * (POWER((1 + @CompoundingInterest),@Period ) - 1)),0)

SET @Principal =
CASE
WHEN @Period = 1
THEN
ROUND((ROUND(@LoanAmount,0) - ROUND(@CurrentBalance,0)),0)
ELSE
ROUND ((SELECT ABS(ROUND(CURRENT_BALANCE,0) - ROUND(@CurrentBalance,0))
FROM #EMI
WHERE PERIOD = @Period -1),2)
END

SET @Interest = ROUND(ABS(ROUND(@Payment,2) - ROUND(@Principal,2)),2)

SET @LoanDueDate = @LoanPayDate

INSERT
#EMI

SELECT

@Period,
@LoanDueDate,
@Payment,
@CurrentBalance,
@Interest,
@Principal

SET @Period = @Period + 1

SET @LoanPayDate = DATEADD(MM,1,@LoanPayDate)

END

END

SELECT * FROM #EMI
END

Note: This procedure is calculating the EMI for months only, if you want a weekly or daily then please change it as your need.