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How to calculate monthly EMI amount for your Personal Loan?
A Personal Loan is a type of unsecured loan extended to an individual for various purposes such as home improvement, debt consolidation, a significant purchase, or a financial emergency. The loan amount is generally smaller than a secured loan and has higher interest rates.
An EMI, or Equated Monthly Installment, is a fixed amount of money that a borrower pays to the lender each month until the entire loan is paid off. The EMI for a Personal Loan is typically fixed for the whole loan term. This means that the borrower knows exactly how much they will need to pay each month.
A Personal Loan provides several advantages over other loans:
Unlike other loans, it has a shorter repayment period ranging from one to five years. The fixed monthly payments make it easy to budget, and the interest rate is typically lower than that of a credit card. However, it is essential to look around for the best interest rates and borrow only what you need.
Three factors determine the EMI for a Personal Loan.
You can calculate the EMI amount you will be required to pay each month using the formula:
EMI Amount = [P x R x (1+R) ^N]/[(1+R)^N-1]
Wherein P ïƒ principal, i.e., the original loan amount given by the lender on which the interest will be calculated,
R ïƒ rate of interest set by the bank/NBFC,
and N ïƒ loan tenure in months.
For example, consider a Personal Loan of Rs. 1 lakh at an interest rate of 9% for five years., The EMI payable per month will approximately be:
EMI = [100,000 x 9/100/12 x (1+9/100/12)^60] / [(1+9/100/12)^60-1] = Rs. 2076.
The table below shows the yearly repayment schedule for the loan.
| Year | Principal | Interest | Total Payment | Total Balance |
| 2022 | Rs.12,297 | Rs.6,386 | Rs.18,683 | Rs.87,703 |
| 2023 | Rs.17,737 | Rs.7,173 | Rs.24,910 | Rs.69,967 |
| 2024 | Rs.19,400 | Rs.5,510 | Rs.24,910 | Rs.50,566 |
| 2025 | Rs.21,220 | Rs.3,690 | Rs.24,910 | Rs.29,346 |
| 2026 | Rs.23,211 | Rs.1,699 | Rs.24,910 | Rs.6,135 |
| 2027 | Rs.6,135 | Rs. 92 | Rs. 6,228 | |
| Rs. 1,00,361 |
To summarize,
Loan Amount = Rs. 100,000
Total Interest Due = Rs. 24,550
Total Amount Payable = Rs. 1,24,550
EMI = Rs. 2076.
There's an easier way to calculate monthly EMIs than doing all the math. One of the better online calculators is the Poonawalla Fincorp Personal Loan EMI Calculator, which is exceptionally convenient and comes with an intuitive user interface.
Simply enter the required loan amount, interest rate, and loan tenure, and the calculator instantly and accurately calculates your monthly payouts. The calculator can be used to compare loans from different financial institutions, as each institution charges different interest rates. The tenure may also vary across lenders. This way, you will be able to determine the best place for your Personal Loan with an EMI that matches your budget.
A Personal Loan can be a thoughtful way to get funds without risking your personal or professional assets if planned well. Repaying the loan on time can also boost your credit score. Although Personal Loan interest rates are higher than secured loans, you can enjoy relatively affordable rates if you have a good credit score and meet all the eligibility criteria.
However, it is best to take a Personal Loan to meet significant expenses or other urgent needs. It shouldn’t be availed for making unnecessary purchases or investing in risky ventures.
Poonawalla Fincorp ranks among India's premier financial institutions, and our Personal Loans are designed to be quickly processed and disbursed with minimal documentation requirements. We offer Personal Loans up to Rs. 30 lakhs, competitive interest rates, complete transparency, zero hidden fees, and the maximum flexibility required to manage repayments easily.
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
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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