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.
