How Important is an EMI Calculator while Getting a Personal Loan?
Before opting for this credit facility, you must evaluate the monthly instalments in order to figure out whether you can afford the repayment or not. For this, you can take the help of a personal loan EMI calculator to analyse the EMI liability and stick to your repayment tenure without hassle
A personal loan is a borrowed sum which you can use for expensive purchases, emergency expenses, consolidating debt, and so on. Later, these loan amounts are paid back in Equated Monthly Instalments (EMIs) within a pre-determined period.
However, before opting for this credit facility, you must evaluate the monthly instalments in order to figure out whether you can afford the repayment or not. For this, you can take the help of a personal loan EMI calculator to analyse the EMI liability and stick to your repayment tenure without hassle.
Advantageous Factors that Make a Personal Loan EMI Calculator Important
Borrowers often overlook their expenses and face problems like missing an EMI payment. To help you out, a tool called EMI calculator is available. You can use this online calculator any time you need. The several benefits of this calculator include:
- Knowing the EMI Obligation
This specially designed online tool helps you to determine your personal loan EMI liabilities before they apply for this credit facility. By computing the monthly instalments, you will not miss the mark of any EMI payment and retain a healthy credit score.
- Comparing Lenders
While availing a personal loan, you need to compare the lenders and select the one which suits you best and provides an ideal tenure according to your financial status and affordability. The EMI calculator enables you to pick the right lender.
- Finding the Suitable Repayment Tenure
You can figure out the ideal personal loan considering the monthly instalment amount, by using a personal loan EMI calculator. If you can afford to choose a large EMI amount, you can select a shorter tenure for repayment. Remember that choosing a shorter repayment tenure ensures a lower interest outgo when repaying the borrowed amount.
- Negotiating with Lender
After determining their repayment affordability, you can select a lending institution which is ideal for your needs. Furthermore, you can also negotiate with the lender for fixing the interest rates on their loans based on your credit scores. By doing so, you will be able to plan your finances better.
- Saves Time and Shows Correct Results
Another benefit of a personal loan EMI calculator is that it displays the exact result within a fraction of seconds. Calculating EMIs manually can be problematic as there is a chance of errors. But you will never come across such a hassle while using this calculator.
Now, after going through the advantages of using an EMI calculator to compute the monthly instalments of a personal loan, take a look at the steps to use it.
How to Use a Personal Loan EMI Calculator?
You have to follow these easy steps in order to use a personal EMI calculator for analysing the EMIs before availing this loan:
Step 1: Navigate to the official website of a trustworthy lending institution and find the ‘Personal loan EMI calculator’.
Step 2: Adjust the specified sliders to choose the preferred loan principal.
Step 3: After this, enter the rate of interest charged by your lender and select a tenure of loan repayment as per your affordability.
Upon completing all these steps, the calculator will display the monthly instalments and the total interest payable during the tenure.
This online calculator works as per a mathematical formula:
EMI = [P x R x (1+R)^N] / [(1+R)^(N-1)]
Here, EMI represents the Equated Monthly Instalment, R is the rate of interest charged by your lender, P signifies principal amount, and N indicates total repayment tenure.
Now, take a look at the factors that affect Equated Monthly Instalment (EMI) on a personal loan.
Factors that Affect a Personal Loan EMI
Following factors affecting personal loan monthly instalments:
- Amount of Loan
The loan amount you are borrowing from the lender is the foremost factor on which EMI amount depends. Therefore, as the borrowing amount increases, the amount of monthly instalment increases as well.
- Repayment Tenure
Another factor affecting EMIs for a personal loan is the repayment tenure. Both the tenure and amount of EMI are inversely related. In other words, as the repayment tenure extends, the monthly instalment amounts decrease and vice versa. However, having a longer tenure will raise the rate of interest on the principal amount.
- Personal Loan Interest Rate
Interest rates are another factor that decides the EMIs on a personal loan. The lending institution chooses this rate while sanctioning the credit amount. With a higher personal loan interest rate, the monthly instalments will increase too.
Every potential borrower can use a personal loan EMI calculator to determine their EMIs, repayment tenure, unsettled loan amount, etc., and even make the prepayment plan for their loan. Also, by using this calculator, you can expect error-free results instantly. So, make sure that you check out the above steps to operate this tool without hassle.
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