While availing of a personal loan, borrowers must review their financial status and plan their repayment schedule. Advanced repayment planning will help them make the most of the borrowing. Borrowers must gauge their EMI pay-outs beforehand to avoid defaulting on personal loan repayments.
To do so, one must use a personal loan EMI calculator. It is an effective financial tool that allows borrowers to plan their finances and keep a balance between their financial liabilities and EMI repayments. In addition, getting an overview of the repayment structure beforehand helps borrowers make a balanced decision and avoid falling into a debt trap.
How to Use a Personal Loan EMI Calculator
The mathematical formula based on which a personal loan EMI calculator gives out the result is-
EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1]
Here P represents the principal amount
R indicates the interest rate
n denotes loan tenure
To arrive at the EMI amount using a personal loan EMI calculator, borrowers must follow the below-mentioned steps.
Step 1: Go to the official website of any financial institution and go to the personal loan EMI calculator page.
Step 2: Enter desired loan principal. One can also use the slider to set the loan amount.
Step 3: Proceed to put the interest rate and loan tenure in the respective boxes.
Step 4: On entering the three variables, personal loan EMI calculator will display payable EMI amount, total interest and total payable amount.
Borrowers can try various permutations and combinations of the three variables: loan amount, loan tenure and Personal Loan interest rate to arrive at an affordable option. As borrowers keep changing the variables, the calculator will instantly put forward the result.
Benefits of Using a Personal Loan EMI Calculator
Personal loan EMI calculator helps borrowers with the following benefits, helping borrowers with on-time repayments and making the borrowing rewarding.
Fast and error-free results
Manual calculations are susceptible to errors and are time-consuming. In order to expedite the EMI computation, borrowers can conveniently use the personal loan EMI calculator. This financial tool will provide accurate results in a split second, thereby saving the turn-around time of borrowers.
Provide insight into repayment process
Besides providing borrowers with the payable EMIs, a personal loan EMI calculator helps them to comprehend their repayment patterns. Borrowers can effectively plan their finances, and be punctual with the EMI repayments without defaulting on it. In a way, it helps borrowers to improve their credit rating.
Easy comparison of loan options
Different lending institutions extend different offerings. Borrowers have the freedom to compare varied offerings of lenders and access repayment specifics as per their requirements. Borrowers can enter different loan terms on a personal loan EMI calculator to get a holistic view of the EMI repayments and total cost of borrowing.
It helps them streamline their search for the best deal and opt for the credit option that is both affordable and suits their financial requirements the best.
Choose suitable loan tenure
Borrowers can vary different loan tenures to compare the affordability of the EMI pay-outs. For instance, borrowers who can afford higher EMI payments can go for shorter loan tenure. On the other hand, those who want to lower the EMI liability can go for extended loan tenure.
Access to amortisation schedule
A personal loan EMI calculator also grants access to the amortisation schedule for the loan tenure borrowers have selected. This amortisation schedule provides them with the financial break-up showing how much borrowers have paid towards loan repayments and the amount which is yet to repay.
In addition, the table reflects the percentage of the loan principal and interest component and how each EMI payment influences these loan terms.
Facilitates loan management
As borrowers get to view EMI amounts and repayment plans, they can plan their finances effectively and initiate on-time repayments. They can review their EMI pay-outs, manage their expenses to make pre-payments, helping them close the loan account before the deadline and save on interest outgo.
Furthermore, a personal loan EMI calculator is easy to access. This tool is readily available online. Borrowers have to enter the loan amount, repayment term and interest rate to get EMI amount. Moreover, borrowers do not have to disclose their personal or professional details to access this tool; neither do they have to bear any additional charges. They can use it for free, umpteen times.
Factors That Affect Personal Loan EMI
Here are the three primary factors that affect personal loan EMI.
The payable EMIs are directly proportional to sanctioned loan amounts; the higher the loan principal, the higher the EMI liabilities. Hence, borrowers must be mindful of choosing the loan amount.
Rate of interest
Even the interest rate that lenders levy on borrowers is directly proportional to EMI payable. Therefore, borrowers must opt for lenders who are extending a competitive interest rate. However, to fetch a lower interest rate, borrowers must have a stable income status, healthy credit score and robust repayment potential.
Another parameter that affects personal loan EMI is repayment term borrowers choose based on their financial status. The repayment tenure is inversely proportional to EMI pay-outs. Extended loan tenure will lower the EMI liability, whereas shorter loan tenure will result in higher EMI pay-outs.
A personal loan is a preferred credit option as it helps borrowers to access substantial loan amounts against easy-to-meet eligibility criteria, minimal documentation, flexible end use and less processing time. However, before applying for this credit option, borrowers must use a personal loan EMI calculator to determine EMI pay-outs in advance. This financial tool facilitates a better repayment plan and maximises the affordability of the credit option.
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