Perosnal Loan EMI

How EMI Is Calculated on A Personal Loan?

April 30, 2022 • 7593 views

How EMI is calculated on a Personal Loan? - is an important question when calculating Personal Loan EMI. A Personal Loan is a versatile solution for various financial needs, whether planned or unexpected, such as home renovations or medical emergencies. With minimal documentation requirements and quick processing times, borrowers can access funds swiftly. Since a Personal Loan does not require collateral, borrowers can focus on repayment without stress. Read on to learn about how EMI is calculated on a Personal Loan.

What are EMIs or Equated Monthly Instalments?

Equated Monthly Instalment or EMI is a small amount of money paid by a borrower to the lender every month on a pre-determined and specified date to pay off their debt. EMIs have been created so that the borrowed loan is easily paid off in easy instalments over a few years. 
These EMIs are often considered the preferred way of paying off the loans as this method creates discipline among the borrowers to pay a fixed amount every month on a pre-determined date. 
It allows borrowers to have peace of mind, as they are not being pressured to pay the entire amount in a lump sum. Borrowers need to set aside the funds for the EMI and pay it on time to ensure that it does not affect their creditworthiness.

What is a Personal Loan EMI Calculator?

A Personal Loan EMI calculator is a useful tool for estimating your monthly repayments based on the principal amount, loan duration, and interest rate. It provides a convenient way to plan your finances and ensure a balanced cash flow, preventing any shortage of funds.
This calculator typically features sliders for inputting the loan amount, tenure, and interest rate. Once you input these details, it generates the Equated Monthly Instalment (EMI) amount, representing your monthly repayment obligation to the bank. 
By utilising this EMI calculator, you can accurately plan your budget, manage your loan repayment schedule effectively and know how to calculate EMI on a Personal Loan.

How EMI is Calculated on a Personal Loan?

The question of how EMI is calculated on a Personal Loan is very common. The EMI on your Personal Loan or any other type of loan is calculated by this formula:

EMI =[P*(R/100) * {1+(R/100)}^N]/[{1+(R/100)}^(N-1)]
Where
EMI= equated monthly instalment
P= the principal amount borrowed
R= loan interest rate(monthly basis)= annual interest rate/12
N= loan tenure (in months)

Here is how to calculate EMI for Personal Loan with example,
Let us assume that a borrower borrows a sum of ?8 Lakh at a rate of 12% for a tenure of 5 years, the interest for the 1st month will be as follows
(8,00,000*0.12/12)= 8000
The EMI will be calculated as follows:
EMI = [8,00,000*(1/100) * {1+(1/100)}^60]/[{1+(1/100)}^(60-1)] = ?17,796
The total EMI payable is the sum of the interest and the principal amount.

How to Use the Personal Loan EMI Calculator?

If you want to know how EMI is calculated on a Personal Loan, calculate using the EMI Calculator offered by Poonawalla Fincorp to get the best possible results:

  • Step 1: Navigate the Personal Loan EMI Calculator webpage.
  • Step 2: Provide the loan amount in the designated section
  • Step 3: Select the interest rate your lender is offering you
  • Step 4: Enter loan tenure in years 
  • Step 5: Press the ‘Calculate’ button to complete the process 
  • Step 6: After completing the whole process, you will get your ‘EMI Amount’ results

ALSO READ :- Check You CIBIL Score Today To Get A Personal Loan

What are the Benefits of Using the Personal Loan EMI Calculator?

Here are some of the benefits of using an EMI calculator for a Personal Loan:

  • Compare Loans

Enter the amount of the loan and adjust the interest rate and duration to get an idea of the EMI you have to incur every month.

  • Save Time

Calculating EMI takes less than a minute when using the Personal Loan EMI calculator. Also, EMI calculators are very easy to use and 100% accurate.

  • Customise the Credit

Key in different loan tenures and find out the effect on EMI in each case. If you are ready to pay a higher EMI and would like to close your loan early, go for a shorter period. If not, you can always choose a longer tenure.

  • Check Your Payment Schedule

The Personal Loan EMI calculator gives you a complete breakdown of your payment schedule. That way, you will get an idea of how much you must pay every month and its bifurcation into principal and interest.

  • Verify EMI information

You can verify your payment schedule as provided by the lender using the Personal Loan EMI calculator.

Factors Affecting the Interest on a Personal Loan

Key factors affecting the total amount of your EMI payable include the following:

  • Loan Principle

The total amount of your loan is one of the most important factors affecting the EMI. The higher the principal, the higher the EMI. 

  • Interest Rate

If the interest rate is higher, it can significantly increase the total payable amount of your loan. Hence, affecting your EMI amount and the total interest paid on your loan. 

  • Tenure

If you choose a longer tenure, the EMI payment will decrease compared to a shorter term. But longevity leads to higher interest paid over time.

How to Get a Low-Interest Rate on a Personal Loan?

If you are looking to apply for a Personal Loan, here are a few tips to help you earn the lowest interest rates:

  • Upgrade Your Credit Score

A high credit score allows you to avail better loan terms. Check your score before applying for a loan. Scores above 750 increase your chances of getting lower interest rates and instant approval.

  • Avoid Losing Payments

If you miss out on the repayment of a loan or a credit card, your credit score may be severely affected. Lenders usually consider your payment history before deciding on Personal Loan interest rates. Individuals with a good history of loan repayment can get a lower interest rate on their loans.

  • Keep an Eye Out for Offers

Banks and financial institutions generally offer special interest rates for a limited period during the holiday season. If you apply for a loan while such an offer is available, you may get a lower interest rate.

  • Compare Interest Rates

Before applying to a particular lender for a Personal Loan, it is necessary to compare the interest rates charged by various lenders. This will allow you to get a Personal Loan with a competitive interest rate.

To Conclude

Now that you know how EMI is calculated on a Personal Loan, you can simply use variables such as principal, interest rate, and tenure to find an EMI that suits you. The EMI calculator makes comparison of loan offers between financial institutions easy. 
To find different offers from different lenders, you need to change the loan amount, tenure, and interest rate numbers to find the EMI for each lender. A trusted EMI calculator will help you select the best Personal Loan and avoid loan traps. 

Frequently Asked Questions About EMI Calculator

1.    Is it possible to prepay my Personal Loan?
Yes, you can pay the outstanding amount of your Personal Loan either in partial pre-payment mode or in a full pre-payment mode. In case you want to make a full pre-payment of your loan, it can be settled the entire loan amount in a single payment. Otherwise, you can also pay a part of the principal as a partial pre-payment of your Personal Loan.

2.    Why is it important to calculate my EMIs?
It is a must to calculate the Personal Loan EMI amount to know if you are willing to avail a Personal Loan. Having a comprehensive idea about EMIs can help you avoid any stress over incurring hefty penalties and any reduction of credit scores.

3.    How to use the Personal Loan EMI calculator to find the best loan offers?
You can use a Personal Loan EMI calculator to compare loan offers from different financial institutions. Each lender offers different interest rates and loan tenures. After calculating the EMI, you will be able to figure out the loan offer with the least EMI and interest rate that matches your budget.

4.    Can I use the Personal Loan EMI calculator to calculate the EMIs of other loans?
You can use a Personal Loan EMI calculator to calculate the EMIs regardless of the type of Personal Loan. It can be any kind of wedding loan, secured and unsecured Personal Loan, debt consolidation loan, or any other loan.

Disclaimer

We take utmost care to provide information based on internal data and reliable sources. However, this article and associated web pages provide generic information for reference purposes only. Readers must make an informed decision by reviewing the products offered and the terms and conditions. Personal Loan disbursal is at the sole discretion of Poonawalla Fincorp.
*Terms and Conditions apply

poonawalla fincorp team

Poonawalla Fincorp Team

Our team of expert writers and editors are passionate about providing authentic and valuable information on finance. Our aim is to simplify financial and finance-related concepts. We strive to help our readers become more aware and empowered to make informed financial decisions.

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