Banks and their Loan salesmen keep confusing the issue of interest rates and the EMI by talking in a language normal people do not understand. So the average customer either goes by the figure quoted as the interest rate or that quoted as the EMI. More often than not the two never match up.

Microsoft excel has features to calculate EMI and rate of Interest for a given amount and term. Here is how to calculate the EMI for a fixed rate or the rate for a fixed EMI.

Open Microsoft Excel.

Select 'Insert' and then 'function'. This will open an Insert Function dialogue box. Select category as 'financial' and look for PMT in the options displayed.

Select PMT. This will open a function argument dialogue box.
Enter the rae of Interest against the Rate column do not forget to put the % sign after the rate and then /12. This means that you are paying monthly installments.

In the Nper column insert the number of monthly payments. For a 10 year loan enter 120.

In the Pv column enter the total amount of loan. If you are taking insurance add the premium since it will be added to the loan amount and deduct any administrative charges the bank is charging you, Since you will be getting that much lesser.

You are done Click on Okay and you have your EMI in the excel sheet.

For Calculating the rate of Interest for a given EMI
Again open the excel sheet, Select 'insert' followed by 'function'
This time select Rate
A function arguments box will open.
Against Nper, put the total no of installments
Against Pmt enter the EMI told to you. Make the value negative, i.e. put a - sign before the amount.
Against Pv enter the Loan amount

The answer that you get is the monthly rate of interest. In the function bar on top, after the formula type *12. This would give you the annual interest rate you will have to pay for the loan.