When it comes to dealing with urgent costs, personal loans are one of the most useful financial tools. It can help you recover from a financial crisis and enable you to pay your bills on time. You can make use of personal loans to pay for expenses such as a wedding, house remodelling, or foreign trips.
So, if you are looking for a personal loan in India, you must do your research before you get started. It would be best to use a personal loan EMI calculator online in India. This will help you learn how much money you can get and what interest you will be paying.
Let’s start with what is a personal loan EMI calculator online and how to use it.
Understanding Personal Loan EMI Calculator Online
Simply put, a personal loan EMI calculator online is a tool that allows you to decide on the ideal tenure and EMI for your loan.
Personal Loan EMI Calculator available online helps you quickly calculate your EMIs. This will help you calculate interest cost, and the total amount payable against various loan amounts with varied interest rates and loan tenures.
How does this help, you may think?
Well, once you know your EMI ahead of time, it helps you plan your budget before you opt for a personal loan. Generally, most lenders will deny a personal loan if the total EMIs, including the projected EMI of the new loan, exceed 50% – 55% of your take-home pay/ salary.
Calculating Personal Loan EMIs
When you begin to calculate personal loan EMI, you’d have to keep three major criteria in mind, namely:
- Your desired loan amount.
- Your desired loan term.
- The interest rate.
It’s crucial to learn that these values may differ based on the loan provider. However, these are the three primary factors that determine the EMI on a loan. Thus, before you select a loan, it is vital to understand these three factors and how they result in the loan EMI.
Let’s understand the three primary factors better below:
- Loan Amount
The loan amount denotes the loan principal. This is the actual amount that you borrow from a lender. This loan amount is defined by a variety of criteria relating to the loan application. Based on the loan amount, lenders calculate the interest rate. You must also know that the higher your loan amount is, the greater the monthly EMI will be.
While using the personal loan EMI calculator online, you need to enter the principal amount you desire to borrow in the loan amount field.
- Loan Tenure
Loan tenure refers to the overall time duration of loan payback. Note that loan terms vary based on the type of loan, the loan balance, and the lenders you choose.
For example, with personal loans, you will have shorter repayment terms of up to 5 years. Whereas, with home loans, you will find a longer repayment term of up to 25-30 years. Keep in mind that the longer the term of the loan, the more interest you will be required to pay, and thus higher the EMIs.
- Interest Rate
Interest rates denote the rate at which you borrow an amount from the lender. Based on the type of loan, the principal amount, the tenure, and the lender, you will find offers with interest rates. It is advised that before you select a loan offer, you must examine the interest rates offered by different lenders to pick the ideal option.
The personal Loan EMI calculator online uses the following formula:
EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)],
The variables in this formula denote:
EMI stands for easy monthly instalment.
P denotes the principal amount borrowed.
R denotes the interest rate charged.
N denotes the loan’s payback period (tenure should be in months)
A personal loan EMI calculator online uses this formula to decide the right EMI amount in seconds.
To help you further understand the calculations of the personal loan EMI calculator online, here’s an example:
Let’s say, you take out a loan of Rs. 1 lakh (Principal amount), for a tenure of 2 years (Payback period), at an interest rate of 15% per annum (The interest levied by the financial institution).
To begin, you must convert the yearly interest rate to a monthly rate and the overall duration to months.
You divide the annual interest rate by the number of months in a year, i.e. 12, to get the monthly interest rate, which is 15/12 = 1.25% each month.
Before you include the 2-year loan duration into the calculation, you must convert that into months as well, which is 2* 12 = 24 months.
Now you have the three variables with you which can be integrated into the formula as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
EMI= [1,00,000 x 1.25/100 x (1+1.25/100) ^ 24 / [(1+1.25/100) ^ 24 – 1)]
EMI= Rs. 4,849
This is exactly where using a personal loan EMI calculator online comes in handy. You don’t have to do the calculations yourself when you have a perfectly designed tool to help you do so.
If you are still not convinced about using a personal loan calculator online, here are some other benefits you must know: –
- You can experiment with the EMI calculator to find the ideal EMI amount of your choice
- You can check your loan eligibility
- You can get the best loan offers according to your eligibility and unique requirements
- You can compare different loans against the pre-set parameters
- You can apply online for a loan immediately
Manage Finances The Smart Way Ahead By Securing A Personal Loan In India
When you consider the intricate mathematics required, manually calculating EMIs can be difficult and time-consuming. So why bother with the hassle, when you can do it the easy way?
Leading lenders such as Piramal Finance have a personal loan EMI calculator online to make EMI calculation hassle-free for you. The online personal loan EMI calculator available with Piramal Finance is absolutely simple to use. Plus, the bonus point is, when you explore personal loan options on Piramal Finance, you can also make use of their expert financial advice to ensure you make the right decision.