Learn Everything About EMI Using A Personal Loan Calculator

Acquiring a personal loan in today’s digitally-driven financial landscape is significantly easier. These end-use free credits ensure an efficient solution to one’s liquidity crunch, enabling him/her to curtail unexpected expenses without facing immense financial strain.

• The approval rate for personal loans went up from 29% in August 2019 to 31.6% in August 2020 (2)
• India’s personal loan market is anticipated to grow by 10% annually between 2020 and 2025 (3)

Irrespective of the ease, a prospective borrower shall note that personal loan EMIs can put a dent on their monthly budget if obtained without sufficient planning. Thus, using a personal loan calculator before applying is imperative. An applicant can gain a rough idea about the instalments they need to serve for a particular loan amount and tenor, and whether it’s feasible with their current earnings.

How to use a personal loan EMI calculator

• A personal loan calculator utilises three primary variables
• Principal
• Tenor
• Interest rate

It generally functions on the standard formula for the computation of EMIs, which is

EMI = {P x R x (1 + R) ^n} / {(1 + R) ^ (n – 1)}

Nevertheless, when you use an online personal loan calculator, you do not need to worry about this formula. Enter the principal, tenor, and estimated interest rate to view pertinent instalments.

Advanced online calculators show the total interest, entire repayable sum, and amortisation schedule alongside EMIs. Thus, financial planning becomes notably easier with a loan calculator at your disposal. However, it’s not the only benefit such a calculator proffer.

What are the merits of a personal loan calculator?
The following are a few ways an EMI calculator benefits prospective borrowers –

Help choose a suitable principal and tenor
As discussed above, EMIs are calculated based on the principal and repayment period. A calculator lets individuals understand the relation of these variables with EMIs more distinctly. Usually, instalments are lower if the tenor is prolonged and vice-versa.

An online calculator helps you find the right personal loan tenor that works for you. You can adjust the tenor and principal multiple times to reach an instalment amount that you can comfortably repay. It also improves your personal loan eligibility since the lender is confident of your repayment capacity.

Compare financial institutions
A personal loan calculator is also beneficial in comparing financiers. Suppose you are stumped between two lending institutions, both offering low-interest personal loans. In that case, a calculator can help you determine which option will facilitate additional savings. Note that, even a difference as meagre as 0.5% can create substantial differences in EMIs and the total interest outgo.

To put it in perspective, suppose Reema acquires a personal loan of Rs.25 lakh at 12% interest for 60 months. She will have to pay Rs.55611 as an instalment every month and Rs.836672 as the total interest. If the interest rate is upped by 0.5%, she will have to service EMIs of Rs.56245 and incur a total interest of Rs.874689.

Efficient financial planning
A personal loan calculator also shows a loan’s amortisation schedule, which contains the breakup of EMIs throughout the tenor. It solidifies a prospective borrower’s understanding of instalments, allowing them to plan their personal loan EMI repayment better. Individuals can refer to it to chalk out a budget and also how they can reduce their debt burden with part prepayments.

Nevertheless, before you apply for a personal loan, ensure you are eligible for one. The factor to focus on is your credit score. Ensure it is above 750 to be eligible. Specific financial institutions also provide a personal loan for CIBIL defaulters, if they

• Apply with a guarantor or co-applicant with a high credit score
• Apply for a low principal or a long tenor

In case your concern is the disbursal time, you can also look for pre-approved personal loan offers that specific financial institutions like Bajaj Finserv extend. These offers are available on personal loans, business loans, and even credit cards. Check your pre-approved offer now with a few essential details.

Regardless of how you obtain a loan, ensure to have a robust repayment plan in place so that you can avoid missing out on payments due to untoward circumstances. Use a personal loan calculator to determine an EMI that allows you to do so.

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