How to Calculate EMI for Personal Loan?

Nowadays, obtaining approval for a Personal Loan is easier because this type of loan does not always require collateral; most lenders have relaxed eligibility criteria. However, the most challenging aspect of a Personal Loan is repaying it on time.

Before applying for a Personal Loan, you must check your eligibility. The Personal Loan eligibility calculator can help you figure out the amount you can borrow based on your income, CIBIL score, financial obligations, and more.

Borrowing within your eligibility allows you to avoid loan application rejections and repay the loan without distress. Thus, an eligibility checker prevents your credit score from going down.

The most important aspect before you apply for a Personal Loan is knowing when and how to pay it back. Thus, knowing beforehand how much you must pay towards the EMI (Equated Monthly Instalment) is essential. To estimate your EMI, you can take the help of a Personal Loan EMI calculator.

This article discusses the benefits of using an EMI calculator and describes how to calculate the EMI for a Personal Loan.

What is Personal Loan EMI?

Personal Loan EMI refers to the equated monthly instalment you must pay periodically to repay your loan. The EMI amount of a Personal Loan depends on the loan amount, interest rate, and repayment tenure.

In India, Personal Loan is more popular than other loans due to the following reasons:

• You do not need to produce collateral to procure a Personal Loan. Hence, they have minimal documentation.
• There is no restriction on the use of the loan money.
• Straightforward application process and fast processing time.

Also read: What Are The Types Of Personal Loan Interest?

What is a Personal Loan EMI calculator?

An online Personal Loan EMI calculator aids you in estimating your monthly loan repayments.

To use a Personal Loan EMI calculator, you need to enter the following information:

• Loan amount
• Interest rate
• Repayment tenure

Once this information is entered, the calculator will display the EMI amount. Comparing EMIs from different lenders using a Personal Loan EMI calculator helps you get the best deal.

Advantages of a Personal Loan EMI calculator

• One of the most significant benefits of using a Personal Loan EMI Calculator is quickly obtaining accurate calculations. Calculating Personal Loan EMIs by hand can be difficult and often leads to incorrect results, as the computation is complex.
  Knowing the exact figure in advance allows you to plan your finances effectively. You can change your expenses or lifestyle to accommodate the EMI if necessary.


• An EMI calculator simplifies the comparison between Personal Loan options. Just input the loan amount you intend to take, the interest rate offered by the lender, and the loan tenure. The EMI calculator will inform you of the monthly instalment amount and total interest payable. A comparison of different options allows you to select the Personal Loan that best suits your needs.


• Usually, Personal Loan EMI calculators visually represent the loan repayment schedule. It includes a breakdown of your EMI's principal and interest components over the loan tenure. Thus, you can understand loan repayment easily and plan your finances accordingly.

How do Personal Loan EMI calculators work?

The EMI is a fixed amount you must pay on a prefixed date every month during the loan term to repay the loan. It has two components: principal and interest. During the initial years of the term, the interest component on a loan will be higher than the principal. To calculate the EMI, you need the amount to borrow, the loan duration, and the interest rate.

The formula to calculate the EMI for a Personal Loan is:

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

(P = Loan Principal amount, R = Monthly interest rate, N = Loan tenure in months)

Follow these steps to calculate the EMI before applying for a Personal Loan:

• Determine the loan amount you would like to borrow.
• Research and compare the Personal Loan interest rates offered by different lenders. Normally, lenders provide an annual interest rate for the loan. Hence, while calculating the EMI, remember to divide it by 12 and express it as a decimal.
• Usually, lenders offer flexible repayment tenure. Hence, decide on the loan tenure that is convenient for you. For EMI calculation, you need the loan tenure in months.
• Now, substitute the above values in the Personal Loan EMI calculation formula.
• The result will be the monthly instalment of your Personal Loan.

Note that the aforementioned formula to calculate the EMI for Personal Loans assumes that the interest rate will remain unchanged throughout the loan tenure. Apart from the interest rate, other fees and charges may be associated with a Personal Loan. This formula does not consider such charges while calculating the EMI. Hence, to find the exact EMI, use the lender's online EMI calculator, which factors in any specific terms and conditions of the loan.

Benefits of taking Personal Loans

Personal Loans have a simple application process

Unlike other loan types, such as Home Loans and Car Loans, Personal Loans have a simple approval process as they require minimum documentation. As more lenders adopt digital applications and processing, you can easily avail of a paperless Personal Loan.



Fixed interest rate

Personal Loans have fixed interest rates where the interest rate remains the same throughout the loan tenure. This helps you to optimise your financial planning better.



Swift loan disbursement

Most lenders prefer to follow the digital application process for Personal Loans as it simplifies and quickens the loan verification and approval process. It takes only a few hours for Personal Loan disbursement if you meet the loan eligibility criteria the lender sets.

To understand more about the duration of the Personal Loan process, click here.



Flexible loan tenure

Most lenders offer flexible repayment facilities to their Personal Loan customers. The loan tenure of Personal Loans usually ranges between one and five years. You can select a repayment tenure according to your repayment capacity.



Credit score plays a crucial role in Personal Loan approval

As Personal Loans come under the unsecured loan category, lenders assess your application and make decisions mainly based on your credit score and current debt level. A good score helps you to get funds at a reasonable interest rate. However, this does not mean you will not get a Personal Loan if you have a low credit score. While many lenders offer bad credit loans today, it is important to know that the interest rates of such loans is usually higher, and they may also have stricter terms. Hence, improving your credit score ahead of a Personal Loan application is ideal.

Also read: How to Get a Personal Loan with a Low Credit Score?

Factors that affect your Personal Loan EMI

Several factors impact your Personal Loan EMI, and a few important ones are:

• Your credit score
• Your income
• Your debt-to-income ratio
• The loan amount
• Repayment tenure
• Interest rate

Also read: What Is The Salary Requirement For Personal Loan?

Conclusion

Using an online Personal Loan EMI calculator helps you figure out the monthly repayment amount quickly and accurately. You must input the loan amount, tenure and interest rate to calculate the EMI for a Personal Loan. Furthermore, an EMI calculator makes loan comparison easy; just change the numbers to find the EMI for each lender. In summary, an EMI calculator aids in selecting the best Personal Loan and avoiding falling into loan traps.

Also read: How to Track your Personal Loan Status?

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