Smart Borrowing: How to Use a Personal Loan EMI Calculator?

Are you considering taking out a personal loan but want to know how much you’ll have to pay monthly in installments? In such circumstances, a personal loan EMI calculator may assist you. You can manage your loan precisely if you have the understanding and confidence to use a personal loan EMI calculator properly. 

This article will show you how to calculate your monthly installment using a personal loan EMI calculator.

The Significance of Personal Loans in India

Let’s briefly examine why personal loans are of great significance for many people before we get into the details of a personal loan EMI calculator:

• Financial Flexibility: Personal loans offer financial flexibility, allowing you to use the funds for various objectives, from home renovations to medical emergencies.
• Quick Access: They provide quick access to funds, often with minimal documentation and challenges.
• Structured Repayment: Personal loans come with a structured repayment plan that ensures you can repay the borrowed amount over a specific time.
• Interest Rates: These loans have variable interest rates. Therefore, it’s vital to understand how they will affect your loan repayments.

Understanding the Personal Loan EMI Calculator

A Personal Loan EMI (Equated Monthly Installment) Calculator is a financial tool that helps you estimate the monthly repayment amount for your loan. It simplifies complex calculations and provides instant results.

Why Use a Personal Loan EMI Calculator?

Using a personal loan EMI calculator helps in financial planning as it allows you to:

• Plan Your Budget: Knowing the EMI amount in advance helps you budget your expenses more effectively.
• Consider Loan Affordability: You can research properly and analyse whether a particular loan amount fits your financial situation.
• Compare Loan Offers: Effortlessly compare various personal loan options to discover the most suitable one for your requirements.

The Formula Behind the Personal Loan EMI Calculation

While you don’t need to deal with numbers manually, understanding the formula can help you understand the calculation process:

EMI = [P x R x (1+R)^N] / [(1+R)^N-1]

Where:

• EMI is the Equated Monthly Installment.
• P stands for the Principal Loan Amount (the amount you wish to borrow).
• R is the Monthly Interest Rate (Annual Interest Rate divided by 12 months).
• N represents the Loan Tenure in months.

How to Use a Personal Loan EMI Calculator?

Using a Personal Loan EMI Calculator is a straightforward process. Here’s how you can obtain your personal loan monthly EMI instalments:

• Enter Loan Amount

Input the amount of the personal loan you intend to borrow. For instance, if you apply for a 2 lakhs personal loan, enter “2,00,000.”

• Set Interest Rate

Enter the annual interest rate offered by the lender. Personal loan interest rates can vary, so use the current rate.

• Choose Loan Tenure

Select the repayment tenure in months. Typically, personal loan tenures range from 12 to 60 months, depending on the lender.

• Calculate EMI

Click the ‘Calculate’ button, and the EMI calculator will display your estimated monthly instalment.

Example of Using a Personal Loan EMI Calculator

Suppose you want to borrow a 2 lakhs personal loan at an annual interest rate of 12% for 36 months (3 years). In that case, you will have to enter these details in the personal loan EMI calculator as follows:

• Loan Amount: ₹2,00,000
• Interest Rate: 12%
• Loan Tenure: 36 months

The EMI Calculator will give you the following results:

• Monthly Installment (EMI): ₹6,666.67

Benefits of Using a Personal Loan EMI Calculator

Using a personal loan EMI calculator offers various advantages, including the following:

Accurate Financial Planning

Knowing your EMI amount upfront helps you budget your monthly expenses more effectively. You can confidently plan your finances, ensuring your loan repayment fits comfortably into your budget and lifestyle.

Quick Decision-Making

Using a personal loan EMI calculator helps you efficiently compare loan options from various banks and financial institutes. This enables you to make an informed decision and choose the best proposal loan option, depending on your financial situation.

Restricted Over-Borrowing

The calculator prevents you from borrowing more than you can adequately repay. It helps you set a realistic loan amount based on your ability to manage the monthly EMI.

Interest Savings

With an EMI calculator, you can experiment with different tenures and interest rates to find a balance to minimise your total interest payments over the loan tenure.

Conclusion

A personal loan EMI calculator can prove to be valuable for anyone considering applying for a personal loan. It provides clarity and entrusts you to make well-informed financial decisions. 

The calculator lets you confidently move forward with your personal loan application, knowing your monthly financial responsibilities. So, before you apply for a 2 lakhs personal loan or any other amount, be sure to use the strength of a personal loan EMI calculator.