Whether to fund a wedding, education, vacation, shopping, medical emergency, or home renovation, every individual requires a cash influx to finance their various expenses. Personal loans from reputable financial institutions instantly fulfil an individual’s urgent or planned financial requirements. Besides, these collateral-free loans do not require the security of an asset to be pledged as collateral. However, loan seekers must calculate their EMIs before applying using a personal loan EMI calculator. The EMI calculator is a free online tool to calculate loan instalments, allowing borrowers to manage their repayments better.
Read on to learn more about the online EMI calculators and how it calculates the loan EMIs.
What is a personal loan EMI calculator?
Manual EMI calculation is a cumbersome, error-prone, and time-consuming process. Many reputable financial institutions provide EMI calculators on their websites to calculate the EMIs automatically. Using an EMI calculator, prospective borrowers can calculate the amount they will need to pay each month throughout the loan term. By making EMI calculations faster and easier for users, the calculator helps aspiring borrowers quickly calculate their EMIs by entering a few loan-related variables and selecting a loan term with budget-friendly EMIs.
Why Should You Use a Personal Loan EMI Calculator?
Using an EMI calculator to check the EMIs beforehand provides an estimate of the monthly payable instalment amount, allowing applicants to create a budget and plan their finances according to their repayment capacity. Knowing the EMIs before selecting a loan term is intelligent, as it provides multiple benefits over an individual’s monthly budget and finances.
While the online tool handles all the manual work, borrowers can plan their loan applications more efficiently while getting their financial situation in order. Consistent repayment also improves their personal loan eligibility for future applications, making funding easily accessible to them.
Factors Affecting the Loan EMIs
An EMI calculator uses the following three variables to calculate monthly EMIs:
- Principal Amount: The principal amount the borrower applies for largely affects the monthly installment. The higher the principal amount, the bigger the EMIs.
- Rate of Interest: The personal loan interest rate is a crucial component of computing loan EMIs. However, interest rates may depend on several other factors, including the applicant’s income, DTI ratio, credit history, etc. Compare loan offers from different financial institutions and apply for a loan plan with the lowest interest rate.
- Repayment Tenure: The repayment tenure is an important factor determining the loan EMIs. Longer loan tenures reduce the EMI size, while shorter terms increase that amount. By using a personal loan EMI calculator, aspiring borrowers can adjust the loan tenure until they find an EMI amount they can conveniently repay.
What Is the Function of an EMI Calculator?
EMI calculators use a standard mathematical formula to compute EMIs using several variables like the loan amount, rate of interest, and repayment tenure. The formula that it uses is as follows:
P r (1 + r)n/(1 + r)n – 1) = EMI
In this formula, P = principal amount, R = rate of interest, and N = tenure.
To instantly calculate the monthly instalment amount, the user must enter appropriate variables in the appropriate places.For instance, if an individual borrows a personal loan of Rs. 1.5 lakh at a 12% interest rate for two years, their monthly instalment amount would be Rs. 7,061. However, if they borrow the same loan for three years, their monthly EMI amount will be 4,982. So, it’s evident that as the loan tenure increases, the EMI amount becomes smaller and more easily repayable. Borrowers must analyse their monthly income and expenses to select a loan term with conveniently affordable EMIs.
What Effect Does an EMI Calculator Have on Interest Outgo?
A personal loan EMI calculator helps compute the loan EMIs and allows users to get a complete breakdown of their total loan cost. Because interest is a significant cost borrowers pay for borrowing a loan, knowing the EMIs and interest cost is critical for effective financial planning.
Since an EMI calculator helps calculate the monthly EMIs according to the loan amount, interest rate, and loan tenure, reducing the repayment tenure will increase the monthly EMI amount but reduce the total interest outgo on a particular loan plan. As the borrower chooses a longer term, their EMI amount decreases, but it leads to a higher interest outgo due to the more EMIs involved in repayment. Therefore, an EMI calculator helps borrowers make sound decisions in accordance with their repayment capacities.
Stepwise Process for Using a Personal Loan EMI Calculator
Nowadays, most digital financial institutions provide EMI-calculating tools on their websites and loan apps to help aspiring borrowers calculate their EMIs for free. The loan seekers should follow these steps to obtain the desired results instantly:
- Visit the financial institution’s website or download their app.
- Select the “EMI calculator” from the menu.
- Use the first slider to select the loan amount you wish to borrow.
- Use the second slider to adjust the offered interest rate.
- Use the third slider to choose the loan tenure.
- The calculator will automatically calculate the EMIs based on the entered variables.
- The approximate EMI amount will appear on the screen instantly.
Benefits of Using a Personal Loan EMI Calculator
Here are a few benefits of using an EMI calculator to calculate EMIs:
- Accurate Results: Manual calculations are error-prone, significantly disturbing the borrower’s finances. An online EMI calculator leaves no chance for errors by providing accurate results in real time.
- Time-saving: An EMI calculator saves a lot of time and effort compared to calculating the EMIs manually. Users must enter some crucial variables to receive accurate results in a flash.
- Easy Comparison: An EMI calculator helps compare different loan schemes according to the applicant’s desired loan amount, interest rate, and repayment tenure. Accordingly, loan seekers can choose a loan plan to make an intelligent borrowing decision.
A personal loan is the best option for assisting an individual in covering various expenses.However, choosing a loan plan requires sufficient comparisons and calculations to make an informed decision. A personal loan EMI calculator is a free online tool that helps borrowers get an estimation of their EMIs and create a repayment plan without hurting their finances.
Also Read: Applying For A Personal Loan? Read This To Understand The Details