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Personal Loan Calculator
A Personal Loan calculator is an online tool that can easily help borrowers know the monthly equated monthly instalments they are required to pay as repayment for Personal Loans. The calculator also helps borrowers know how much interest they will end up paying, depending on the various loan tenures.
The Personal Loan calculator also gives an idea of the total amount a borrower will end up paying for the personal loan, inclusive of both the principal amount and interest amount. Overall, it helps borrowers plan their finances better.
How does a Personal Loan EMI Calculator work?
A Personal Loan monthly EMI calculator is simple to use. The calculator helps individuals find the exact monthly loan repayment amount based on certain parameters.
Here's how a Personal Loan EMI calculator works:
1. Enter Parameters: Borrowers are required to enter the following parameters to calculate the EMI amount:
- Loan Amount: The total amount a borrower is planning to borrow from a bank or a financial institution.
- Interest Rate: The annual interest rate offered by the lender. But for calculation purposes, the calculator converts it into a monthly interest rate.
- Loan Tenure: The duration in which the loan will be repaid by the borrower to the lender. The loan tenure can be either in months or years.
2. Once borrowers enter the data in all the parameters, the Personal Loan EMI calculator uses the EMI formula to do the math before showing the EMI amount.
3. The EMI calculator will show the exact monthly EMI as well as the total interest and the total amount payable for the Personal Loan.
Before applying for a Personal Loan, borrowers can tweak the parameters to find the best EMI option for them. For instance, a higher loan amount or a shorter tenure will increase the EMI while a lower principal and longer repayment period will reduce the sum to be paid as monthly instalments.
Formula to determine Personal Loan EMI
The formula for calculating Equated Monthly Installment (EMI) for a loan is based on the present value of the annuity formula. It takes into account various parameters such as principal amount, interest rate and loan tenure to calculate the fixed monthly instalment amount.
The general formula for calculating EMI is as follows:
E = P*r(1+r)^n/[(1+r)^n-1]
In the above EMI formula, here is what the abbreviations mean:
- E is the Equated Monthly Instalment
- P is the principal loan amount
- r is the monthly interest rate which can be calculated by dividing the annual interest rate by 12. It is generally expressed as a decimal.
- n is the total number of monthly instalments to be paid by the borrower.
Note: Keep in mind that this formula assumes a fixed interest rate throughout the loan tenure and is not suitable for calculating EMIs for reducing rate loans.
Benefits of using Personal Loan Calculator for EMI
A Personal Loan Calculator for EMI is a very helpful tool. Here are the top benefits of using a Personal Loan calculator for EMI:
- A Personal Loan calculator shows the exact monthly instalment amount to be paid by the borrower to the lender.
- Some Personal Loan calculators also show the total repayment amount, which is inclusive of the principal amount and total interest amount.
- Borrowers can tweak the parameters on the calculator to arrive at the best EMI amount that they can easily pay to the lender every month.
- EMI calculator also helps borrowers in financial planning as they show the monthly instalment before they even apply and take a Personal Loan.
- Last but not least, the calculator is simple, fast and easy to use. It provides quick and exact results, which otherwise would take a lot of time.
Frequently Asked Questions
How is the Personal Loan EMI to be paid?
1. NACH: One of the most common ways to repay EMIs is via NACH (National Automated Clearing House). You can allow banks to debit the EMI amount against a Personal Loan on a fixed date every month via the NACH system.
2. Post-dated cheques: You can provide post-dated cheques to lenders to repay your Personal Loans.
3. UPI: You can pay your Personal Loan instalments via UPI (Unified Payments Interface).
4. Online banking: EMIs can also be repaid using online banking facilities.
How to use Personal Loan EMI calculator?
To use a Personal Loan EMI calculator, you need to enter a few important details such as the loan amount or principal, interest rate and the loan tenure. Upon entering the details, the calculator uses the EMI formula to show the monthly instalment amount. Some calculators also show the total repayable amount, which includes both the loan amount and interest amount.
How to reduce your Personal Loan EMIs?
You can reduce Personal Loan EMIs through various means. To begin with, you can increase the loan tenure or take a smaller loan to reduce the monthly instalment. Selecting the lender offering the lowest interest rate also helps in reducing EMIs. Therefore, it is important to compare the interest rates from all banks and financial institutions before taking a loan.
Does the EMI amount remain fixed throughout the loan tenure?
Yes, the EMI amount of a Personal Loan remains fixed throughout the loan tenure if the borrower took the loan at fixed interest. So, even though the components - amount of principal and interest sum keeps on reducing as the principal due reduces over time, the EMI amount remains the same. However, in reducing interest loans, the monthly EMIs also keep decreasing.