A personal loan is an unsecured loan, which means that there is no collateral involved. It is collateral-free financing of your financial needs. There are no restrictions on how you can use the sanctioned loan amount. It can be used to pay for a costly surgery, manage your wedding cost, plan an international trip or even consolidate all your debts into one loan.
However, like any other loan, you need to repay the loan amount with interest. Therefore, it becomes paramount to evaluate your finances and needs before applying for a personal loan. One tool that plays a crucial role in your financial planning is a personal loan EMI calculator which is available on every lender’s website. It can help you determine the exact amount you can afford to pay every month as EMI.
What is a Personal Loan EMI Calculator?
It is a simple and easy-to-use online tool provided by lenders to help borrowers calculate an affordable EMI with reasonable interest rates and flexible repayment loan tenure. The equated monthly installments (EMI) amount is determined based on three components such as principal loan amount, interest rate, and loan tenure.
You can alter the variable as much as you want until you come with an EMI that works for you. Keep in mind that the loan amount and repayment timeline depends on your repayment capacity, and the interest rate is calculated based on your eligibility. Here are some of the ways a personal loan EMI calculator helps with your financial planning.
Ways a Personal Loan Calculator Helps with Financial Planning:
- Generate accurate results quickly
The best part of a personal loan EMI calculator is that it leaves no room for errors, whereas calculations on pen and paper are subject to mistakes and are arduous. The EMI calculation formula is fed as an algorithm, which instantly produces accurate results. It is what makes quick personal loans.
Furthermore, it is easy to use, and anyone can access it free of cost. You can use it multiple times to come up with an affordable figure. You will need to enter the principal loan amount, rate of interest, and the loan tenure of your choice to compute an EMI of your preference.
- loan tenure and principal loan amount
You can use the calculator to change the value of the loan parameter as many times as you want. For example, you can decrease the loan amount and increase the loan tenure to find a more affordable EMI. However, you must know that the longer the repayment tenure, the higher your total interest will be. Also, choosing a shorter loan tenure will increase your EMIs.
So, adjust the values of the loan amount and repayment tenure until you arrive at an EMI that is financially viable to you.
- Visual representation of the amount due
Your equated monthly installments (EMIs) include the interest rate and part of the principal amount. It enables you to know how much of your total monthly payment is going towards the interest and how much towards paying off the principal amount in the form of charts.
For instance, if you apply for a loan amount of Rs. 10,00,000 for 48 months for an interest rate of 18%, you will find that your total amount due is Rs. 14,10,000. The pie chart shows that 29% goes towards the interest and 71% towards the principal amount.
- Select the right lender
While calculating your EMI, you will have to factor in the interest rate charged by the lender. Any marginal difference can have a major impact on the EMI amount payable. Therefore, if you keep the loan amount and loan tenure constant while entering different lenders’ interest rates, you will find the most affordable loan. Upon finalizing a list of viable lenders, check other features and benefits to ensure a pleasant and hassle-free loan experience.
A personal loan EMI calculator is a crucial tool in your financial planning. It also adds great value in ensuring quick personal loans. So, while applying for a personal loan to meet your financial needs without straining your savings, make the best use of an EMI calculator to determine an EMI amount based on your preference.