Loan Engines - Calculations

This guide breaks down how Embarc calculates your loan schedule step by step for both Fixed Installment and Dynamic Installment loans. You’ll see exactly how interest, principal, and disbursals affect your payments, and why the total cash flows can differ when your loan is disbursed in stages.

Shared Loan Terms

The two schedules differ only in how repayments are structured:

• Fixed Installment loan – one constant installment (except for a tiny final adjustment).
• Dynamic Installment loan – installments are recalculated whenever planned principal enters, producing staged payment levels.

---

How Embarc Calculates Interest

Embarc uses daily interest, which is the fairest and most accurate way.

For each period (i): Interest= Previous Balance × Days in Period(i)/365Days ​×7%

• Days i is the exact number of calendar days from the previous due date (or disbursement date for the first period) to the current due date.
• If a disbursal happens mid-month, that month is split into two parts, one before and one after the new amount and the same formula applies to each part.

Principal for the period is simply Installment i – Interest i, except for small final adjustments made to remove rounding residue.

---

Fixed Installment Loan

In a Fixed Installment loan, your EMI stays the same each month - giving you smooth, predictable payments

How It’s Calculated

1. Build the list of due dates and disbursals.
   1. Each period’s exact days, and
   2. The timing of disbursals (USD 6,000 first, then USD 4,000 before the 4th installment).
2. Use a financial formula (PMT) that considers:
3. Find the single installment amount that brings the loan balance to zero after 12 months.
   1. Embarc calculates USD 864.83.
   2. The final installment slightly adjusts to USD 777.15 (to remove rounding residue).

Spreadsheet replication tip

• List columns: period start, due date, days, opening balance.
• For each row, compute Interest_i with the formula above.
• Set principal = Installment – Interest.
• Update the closing balance = Opening – Principal + PlannedDisbursal.
• Use Goal Seek/Solver to set the closing balance of period 12 to zero by changing the installment cell.

Fixed schedule table (USD)

Totals: Principal = 10,000 | Interest = 290.28 | Total Paid = 10,290.28

Summary: One equal payment for the full term. Simple and predictable.

---

Dynamic Installment Loan

In a Dynamic Installment loan, your EMI is lighter at the beginning and increases once new disbursals happen, matching how your principal actually grows.

How It’s Calculated

1. Stage A (Before 2nd disbursal):
   1. Only USD 6,000 is active.
   2. Embarc finds the installment needed so that the balance before 10 Apr 2025 matches the expected value (USD 4,530.16).
   3. Installment = USD 518.19
2. Stage B (After 2nd disbursal):
   1. Add USD 4,000 on 10 Apr 2025.
   2. Recalculate the new installment so the balance reaches zero by the end of the 12th month.
   3. Installment = USD 974.95 (final one = USD 974.99 for rounding).

Dynamic schedule table (USD)

Totals: principal 10,000.00, interest 329.16, collected cash 10,329.16.

Summary:

1. Smaller EMIs before the second disbursal.
2. Larger EMIs afterward (since more principal is outstanding).
3. Slightly higher total interest because part of the loan stays active longer.

---

Summary of Differences

Both schedules share the same daily interest mechanics. The only distinction is when and how the payment amount is solved.

Key Takeaways

1. Both follow the same daily interest logic.
2. The difference comes from when new money is added and how payments are recalculated.
3. Dynamic loans usually lead to slightly higher total interest, because a larger balance stays active for longer.
4. Embarc ensures every cent is traceable and every calculation is verifiable.