Personal loans, offered by several commercial lenders, including NBFCs, are collateral-free funds offered to eligible applicants. As per records, more than 78% of availed credits in India are personal loans. However, despite the immense popularity of such a credit, borrowers should carefully consider a few factors before availing a personal loan.
From a borrower’s perspective, decisions related to the loan have to be informed and well-analysed. A thorough idea about future liabilities and repayment norms is equally necessary before applying for a personal loan. To assist interested borrowers in understanding loan estimates, lenders have introduced a personal loan calculator on their portals.
A personal loan EMI calculator helps calculate the monthly instalments which a borrower will have to service once the repayment tenure begins. Personal loans might come with a moratorium period, after the conclusion of which, the pre-discussed EMIs will have to be paid. The use of a personal loan calculator is crucial to determine the cost of borrowing. The estimates help to judge the affordability of a personal loan.
Important points to remember while using a personal loan EMI calculator
- Helps you choose the ideal principal and tenure
While using a personal loan calculator, you can constantly alter the inputs to assess the estimates. You can adjust either of the inputs and see how it impacts your EMIs and plan your loan repayment more efficiently. For example, if the EMIs based on current inputs seem unaffordable, you can extend your tenure or reduce the principal to see if it brings down those estimates.
- It gives you an overall estimate of the loan.
A personal loan EMI calculator not only shows the payable instalments but also shows two other values. One of them is gross interest outgo while the other is the gross amount repaid. The former signifies the total amount you will end up paying as an interest component during repayment and the latter gives the total interest outgo summed up with the original principal. All three estimates provide you with an overall idea of the cost of the debt.
- Assists you in choosing the right lender
The interest rate charged by different lenders might vary substantially. However, even a marginal difference in interest rates can go on to impact the EMIs significantly. You can use the personal loan calculator and enter the interest rates levied by the lenders one by one to identify the lender providing the most affordable and profitable deal on personal loans.
- The formula used to calculate EMI
You must also understand how this calculator works to find out the EMIs. The formula based on which the monthly instalments of a loan is calculated is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here, P denotes the principal sum borrowed as a loan, R represents the rate of interest, and N denotes the number of instalments as per the tenure chosen.
Understanding the steps of how to calculate personal loan EMI through the calculator is also simple. By entering the three mandatory inputs (principal, interest rate, and tenure), you can calculate personal loan EMIs in a few seconds using this online tool.
When you apply for a personal loan, you not only opt for funds but also take up a significant financial responsibility. This responsibility is to last as long as you repay the personal loan entirely. By using a personal loan calculator, you take a step towards handling this debt tactfully.
Most reputed financial institutions introduce EMI calculators for the convenience of their customers. Companies like Bajaj Finserv also extend pre-approved offers to existing customers, which can be availed of on unsecured loans like personal loans, business loans, etc. You can check your pre-approved offers by providing some basic details, such as your name and mobile number.
Checking your loan EMIs using a personal loan calculator also helps you prepare for the repayment accordingly. It also helps you finalize a favourable loan structure to ease out the repayment.
Read More About News