Personal loans are one of the most popular financing options available today as well as sought by individuals when needing urgent funding. These collateral-free loans are available at short notice and require individuals to meet only a few eligibility criteria to apply. Even though their simple requirements make them easily available, it is always prudent to plan well when borrowing funds. A personal loan EMI calculator is a dedicated financial tool especially designed for this purpose and helps individuals make suitable borrowing decision through different computations.
Check out some essential details about the EMI calculator that can help make the tool more of use for you when availing a personal loan. But before that, let’s understand what the tool comprises.
What is a Personal Loan EMI Calculator?
A personal loan EMI calculator is a financial tool that is designed to allow prospective borrowers assess their monthly instalments payable. It comes with a user-friendly interface that allows its convenient use without any expert knowledge. You need to make only a few entries to arrive at the desired result computation.
The calculating tool is quick when it comes to obtaining result, thus ensuring you do not waste any time when assessing your repayment liabilities. It works based on a simple formula, which makes the results accurate every time a new entry is made. Such an accuracy means the individual can rely on the computed results to make necessary borrowing decision. It is ideal to check your repayment liability with the help of the calculator before sending your personal loan application, so you are sure that the borrowing decision made fits well with your financial standing.
How Does the Personal Loan Calculator Work?
As already mentioned, the loan EMI calculator works based on a pre-set formula that is used to determine the EMIs payable along with other required loan repayment liability details. The formula used for the purpose entails as –
Equated Monthly Instalment (EMI) = [PxRx (1+R)^n]/[(1+R)^N-1]
In this formula, P represents the personal loan principal you seek to avail, R stands for the rate of interest, and N represents the loan tenure for which you seek to avail funding in months.
So, when using a personal loan EMI calculator, you essentially need to enter the following 3 necessary details to arrive at the result, which include –
- The loan amount or principal
- The tenure selected for loan repayment expressed in months
- The rate of interest levied by the selected lending institution
Based on these details, the loan calculator computes the necessary results required for making important borrowing decisions such as how much to borrow, what tenure duration to seek, and the likes. The results computed by the calculating tool are –
- The EMIs payable throughout the duration
- The total interest payable over the loan tenure
- The total loan liability payable, including the loan principal and interest
The personal loan calculator also displays a pie chart representing the total principal component and interest component of the total loan liability, which allows the user to gauge how much he/she will end up paying towards the loan repayment.
How to Use a Personal Loan Calculator to Make a Suitable Borrowing Decision?
You can optimally use a personal loan EMI calculator to make a suitable borrowing decision in the following few ways.
- When computing personal loan EMIs payable, observe the change in such amount based on the loan amount entered. Note that the EMIs payable are directly impacted by the change in loan principal sought. So, if you increase your loan amount requirement, it is going to increase the EMIs payable and vice versa.
- To suit your loan affordability, you can select a loan amount that keeps the EMIs payable within the affordable limit as per your financial standing.
- When selecting the loan tenure, observe the duration’s impact on the payable instalments. Unlike the loan amount’s link to the EMIs, tenure selection impacts the instalments differently. For a better understanding, tenure selection is inversely related to the EMI amount computed. It means that any change in tenure selected will change the EMIs in the opposite direction. So, if you are option for a long tenure, it is going to reduce the EMIs payable. Contrarily, a short tenure increases your EMIs payable, reducing the overall affordability. You can make changes to the tenure selected to better make an affordable borrowing decision.
- As total interest payable is computed by the calculator too, you can better assess how much extra you would be paying as a part of the total loan liability when making repayment. You must know that both increased loan amount and tenure mean higher interest payments and vice versa.
Personal loan EMI calculators are available online for residents of all cities in India, which makes assessing borrowing decision simple for all. For instance, whether you are availing a personal loan in Gurgaon, in Delhi, Kolkata, Bangalore, Chennai, or any other city, all you need is to visit your lender’s website to access the financial tool and make necessary calculations before sending loan application.