A Step-By-Step Guide to Using a Personal Loan Calculator - Loan Trivia

## Wednesday 3 August 2022

You can avail a personal loan to take care of your expenses such as home renovation, gifts medical emergencies, and vacations. The loan has to be repaid as equated monthly installments (EMIs). Individuals keen to obtain a loan must be aware that EMIs are the comfortable mode of repaying the loan amount. An online personal loan calculator can be a useful tool in this regard. EMIs comprise both the principal and the interest components.

## What is the Personal Loan EMI Calculator?

The personal loan interest calculator assists you to estimate the equated monthly installment for your loan borrowing. You need to input the desired loan amount, duration of the loan required and the interest rate to arrive at the EMI amount. Depending on your repayment capability the EMI Calculator shall indicate the loan EMI and the total interest payable, the total cost, and the suitable tenor.

#### It is very important to be conscious of the three vital parameters of the personal loan interest calculator, they are:

The rate of interest – is expressed as a percentage applicable to the principal loan amount for the loan tenor.

Loan tenor – is denoted either in months or years. It refers to the period within which a borrower is responsible to repay the entire loan amount along with interest.

Loan amount – Loan amount refers to the total borrowed loan amount. Borrowers have to repay this amount, along with interest at the end of their loan tenor.

#### Individuals can calculate personal loan EMIs through the step-by-step guide mentioned below:

Step 1: Enter the loan amount desired.

Step 2: Enter the rate of interest applicable.

Step 3: Enter the tenor in years or months.

The Loan EMI Calculator is analytical. The lender normally decides the applicable interest rate depending on your repaying capacity and your CIBIL rating.

#### For calculating the EMI the formula used is:

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

P is the principal or the loan amount

R is the rate of interest

N is the number of monthly installments

The EMI calculator helps you plan your repayments as per your budget easily.

Examples

You can adjust the EMI, using the EMI calculator to the amount you can repay.

Illustration

Presume that you need Rs. 1 lakh, and you wish to pay over a year. At a rate of interest of 14%, and a tenor of 12 months:

Then the total interest payable is Rs. 7,746, and EMI is Rs. 8,979

Suppose you wish to pay EMI of less than Rs. 5,000, for a loan amount of Rs. 1 lakh, then you change the tenor to 24 months:

The total interest payable is Rs. 15,233 and the EMI is Rs. 4,801

For the same Return on investment, the loan amount, a longer tenor reduces your EMI however, increases your interest payable. Prospective applicants of emergency loans benefit, considerably by using a personal loan interest rate calculator before applying.

Individuals who use a personal loan calculator get to know the amount they need to pay monthly for repaying the acquired credits.

Read Also: Why is Using an EMI Calculator Important While Borrowing a Personal Loan

### The other benefits are:

#### Accurate and time-savings calculation

Equated monthly installments using the traditional EMI calculation formula is intricate, time-consuming, and subject to errors. Nevertheless, a personal loan interest rate calculator offers correct results instantaneously.

#### Managing budget

An individual can better manage their finances as they know the EMIs that are to be paid in advance.

#### Determining an appropriate loan tenor

An Interest Calculator helps borrowers decide on a suitable loan tenor that fits into their budget. It informs them of the total loan amount and interest payable.

#### Conclusion

In addition to knowing the benefits of using an EMI calculator, prospective loan applicants may also benefit from their lenders. For instance, prominent NBFCs may extend pre-approved offers on secured and unsecured financial products that accelerate the lending process. Thus, individuals in need of urgent funds can use the personal loan calculator before obtaining loans.

Read Also: Important Factors to Keep in Mind While Using a Personal Loan Calculator