When you take out a personal loan, you agree to repay the borrowed amount, plus interest, over a set period of time. Your personal loan repayment schedule will outline how much you need to pay each month to repay your loan in full by the end of the loan term. There are several benefits to Calculate Personal Loan EMI in advance. By knowing how much you need to repay each month, you can budget accordingly and ensure that you have the funds available when your payment is due. Additionally, if you know you will have a large expense coming up (such as a wedding or home renovation), you can adjust your budget accordingly and make additional payments on your personal loan to pay it off more quickly.
A personal loan is a form of unsecured loan. They are considered the best option for people who require urgent funds. This type is easily issued without any collateral, thus making it a popular option among people. They provide easy assistance during medical emergencies, wedding funds, educational funds, etc.
One can easily take up a successful personal loan with proper planning and research. Personal loans are cleared through EMIs, Equated Monthly Instalments. These instalments are paid regularly for a fixed period. It is important to calculate a personal loan EMI priorly to understand what suits the best with your preference. Now, before we understand the procedure for calculating personal loan EMI, let us discuss the factors which affect Personal loan EMI.
Factors affecting EMI for a personal loan
Three major factors play a significant role in calculating personal loan EMI. These factors are discussed below:
- The principal amount is the amount that a borrower wishes to borrow. The EMIs are directly proportional to your loan amount or principal amount. The greater loan amount will mean a higher monthly instalment, and the lower amount will result in a lesser EMI.
- Tenure: Tenure refers to the period under which a borrower has to clear the loan. It shares an indirect relationship with EMI, which means lesser payment tenure will result in higher monthly instalments.
- The rate of interest: The interest that a lender charges on the borrowed or principal amount is known as the rate of interest. This rate forms a directly proportional relationship with EMI. It simply means that a higher personal loan interest rate will result in a higher monthly instalment.
Now, let’s understand how to Calculate EMI for Personal Loan.
Procedure to Calculate EMI for Personal Loan
It’s quite easy to calculate personal loan EMI. Following are the basic steps one needs to adhere to:
Decide the loan amount you wish to borrow:
The borrower must decide on a principal or loan amount they wish to borrow. This amount is the base for EMI calculation. Remember to choose a loan amount that you can conveniently repay without getting burdened. Don’t miss any discounts and offers given by financial institutes.
Choose a lender:
After deciding the principal amount, a borrower is required to choose a lender. One should consider choosing a bank or institute offering a lower personal loan interest rate. Avoid choosing institutes that are not certified or registered with the Reserve bank of India. There can be a chance of a scam.
Fix the tenure for repayment:
After choosing the lender, one needs to decide how much period they may require to repay the loan.
EMI calculation Formula
Now, you only need to put the values in the given formula to determine your monthly EMI for a personal loan.
E = P * r * (1+r) ^n / ((1+r) ^n-1)
E is the EMI (Equated Monthly Instalments)
P is the principal amount
r is the personal loan interest rate
n is the tenure
One can easily calculate their loan EMI with the process mentioned above. Although a borrower can also use the personal loan EMI calculators available on the websites of various financial institutes, in an EMI Calculator, you only need to put the values to get an accurate EMI within seconds.
Calculating your personal loan EMI is a critical part of taking out a personal loan. By understanding how your personal loan interest rate and term length will affect your monthly payments, you can make an informed decision about which loan is right for you. Use calculate personal loan emi to see how different interest rates and terms would impact your monthly payments, and then compare offers from multiple lenders to find the best deal for you.