Personal loans (PLs) are often favoured for their flexibility to cover a range of financial needs – whether it’s managing unexpected expenses, consolidating debt, or funding a wedding. However, making an informed borrowing decision involves more than just selecting the loan amount and choosing a reputable lender.
Personal loan EMI calculators play a crucial role in this regard. They help borrowers estimate their monthly payment obligations, or Equated Monthly Instalments (EMIs). Understanding this information is crucial to ensure that your loan repayment remains manageable and doesn’t place unnecessary strain on your finances.
What Is a Personal Loan EMI Calculator?
A PL loan EMI calculator is a user-friendly online tool that takes into account three key factors: the loan amount, interest rate, and loan tenure. By inputting these details, the calculator provides an instant estimate of your monthly payments as well as the total repayment amount over the loan’s tenure.
Benefits of a Personal Loan EMI Calculator
Here are some key reasons why you should use an EMI loan calculator for personal loans before applying for one:
- Quick and Convenient Calculations: EMI calculators eliminate the need for complex manual calculations, providing instant and accurate estimates of your monthly payments.
- Loan Comparison: Choosing the right personal loan requires careful consideration. With an EMI calculator, you can easily adjust tenures, interest rates, and amounts to see how each variable impacts your monthly payments. This helps you compare and select the most suitable loan option.
- Budgeting: A personal loan EMI calculator is a valuable financial planning tool. By analysing the results alongside your current expenses and future financial goals, you can gain a clearer understanding of your repayment capacity and select a loan amount that aligns with your financial situation.
- Loan Tenures: The EMI calculator can assist in selecting an optimal loan tenure based on your financial comfort. A longer tenure generally results in lower monthly payments but may lead to higher total interest costs, while a shorter tenure can help save on interest costs but may increase the EMI burden.
How to Use a Personal Loan EMI Calculator?
Using a personal loan EMI calculator is simple and straightforward. Follow these steps:
- Enter the Loan Amount: Specify the amount you wish to borrow.
- Choose the Tenure: Select the loan tenure (in months) that best suits your repayment preferences.
- Input the Interest Rate: Enter the interest rate you expect. However, keep in mind that the final rate will be determined by the lender, based on factors like your creditworthiness and repayment capacity.
- Adjust and Compare: Experiment with different combinations of loan amounts, tenures, and interest rates to identify the loan structure that works best for you.
You can access such tools through the websites of well-established lending institutions, such as SMFG India Credit. By utilizing this useful calculator, you can make informed decisions when it comes to borrowing and managing your finances effectively.
Let’s understand EMI calculation better with an example.
Suppose you enter the following details into the EMI calculator:
- Loan Amount: INR 10,00,000
- Annual Interest Rate: 13%
- Loan Tenure: 60 months (5 years)
The calculator then uses the following formula:
EMI = P * R * (1+R)^N / ((1+R)^N – 1)
Where:
- P is the principal loan amount
- R is the monthly interest rate (annual interest rate divided by 12)
- N is the loan tenure in months
By applying this formula, the EMI comes out to approximately INR 22,753. The total interest payable over the tenure of the loan is around INR 3,65,184, and the total amount payable is approximately INR 13,65,184.
Conclusion
Borrowing without understanding the full financial implications can lead to unnecessary stress and potential defaults. That’s why, personal loan EMI calculators play a crucial role in helping borrowers make well-informed decisions.
By using these calculators before applying for a loan, you can realistically assess your repayment capacity, factoring in your existing expenses and future goals. Doing so can help you choose a personal loan with optimal terms that align with your finances and avoid the risk of missed payments.
*EMI calculators only tell you an estimated figure. Your actual EMI, interest rate, and other
loan terms will depend on your eligibility and the lender’s policy at the time of the loan
application.
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