These days, many individuals are borrowing different kinds of loans from banks to fulfil their requirements. It is unaffordable to pay the full amount in lumpsum at one time because of their financial conditions. Many banks and financial institutions offer them attractive interest rates and flexible repayment tenures for their convenience.
With the assistance of a personal loan calculator, users can calculate the interest rate and EMI amount that they have to pay towards the end of the month. They can also check whether they have adequate funds or can even arrange for them before the repayment date. EMI is an abbreviation for Equated Monthly Installments, which the loan borrower repays at the end of every month over the loan tenure. The calculator consists of three components; interest rate, tenure and principal amount.
EMI = Principal or Loan Amount + The rate of interest on the loan
The mathematical formula is:
EMI = P x R x (1+R)n
[(1+R)n-1]
P = Principal Loan Amount
R = Rate of interest on the loan amount calculated monthly
N = The number of monthly instalments
Some important terms
While using an EMI calculator for personal loan, every individual should understand the terms and figures associated with it. They can calculate the EMI faster and in a better manner once they are familiar with the terms.
Loan amount: The sum that the individual borrows for making a purchase such as a car, a home, etc.
Rate of interest: The rate at which borrowers borrow the loan from the lender or the bank
Loan tenure: The period over which the borrower promises to repay the entire loan amount
EMI: Equated Monthly Instalments (EMI) is a fixed sum which the borrower must repay every month over the loan tenure
Processing fees: It is the fee charged for processing the loan and consists of approximately 0.5 per cent to 1 per cent of the loan amount
Credit score: It is the score that the loan applicant obtains based on the borrowing history and the repayment performance The personal loan EMI calculator helps people budget the monthly loan payments against their expenses and income over the tenure, which ranges between 2 to 5 years. Individuals who borrow a hefty loan amount prefer a longer repayment tenure, but they also have a higher rate of interest. Choose only the amount that is affordable to repay and meets the financial goals. Maintain a low debt-to-income ratio to prevent delays in repayments.
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