As the name suggests, EMI, also known as equated monthly instalment, is one part of the equally divided monthly payments to clear off an outstanding loan within a stipulated time period. The calculation of EMI is done mostly by using either the flat-rate method or the reducing-balance (ask the reduce-balance) method. The EMI flat-rate formula is calculated by adding together the principal loan amount and the interest on the principal and dividing the result by the number of periods multiplied by the number of months.
In short, equated monthly instalments are applied to both interest and principal each month so that over a specified number of years, the loan is paid off in full.
Is an EMI scheme good or bad?
Although a good EMI scheme is an advantage to your wallet, it must be avoided as a first option. You may not only be spending more than the actual worth of the product but also splurging first and then relying on EMI payments is not healthy for your finances.
The EMI can be calculated using either the flat-rate method or the reducing-balance (aka the reduce-balance) method. The EMI flat-rate formula is calculated by adding together the principal loan amount and the interest on the principal and dividing the result by the number of periods multiplied by the number of months. But, calculating EMI’s manually may be time-consuming and complex.
What is a personal loan EMI calculator?
However, a personal loan EMI calculator guarantees accurate results in a few seconds. However, a personal loan should only be taken after evaluating certain aspects, such as the amount you borrow, the applicable interest rates, and the repayment tenor, so that your personal finances aren’t strained.
An EMI calculator is an online tool that helps you accurately estimate your EMI over different tenors and for different principal amounts, making the process of planning your repayment easier. Here are five ways in which a personal loan EMI calculator is a must-use to plan stress-free repayment.
- Allows easy comparisons
- Provides accurate results instantly
- Simplifies monthly financial planning
- Helps in maintaining a stable and healthy CIBIL score.
- Easy usage and readily available.
To help you estimate the potential cost of a personal loan, lenders have devised an online personal loan EMI calculator that you can use to plan your repayment before you apply for a personal loan.
How to use a personal loan EMI calculator online?
A personal loan EMI calculator is an online tool that helps determine your EMI and the total interest basis the values for principal, interest rate, and tenure that you input.
The calculator uses the following formula:
EMI = [P x R x (1+R)N ]/[(1+R)N-1]p
Where P = principal or the loan amount
R = Monthly personal loan interest rates
N = Number of EMIs or the tenor
For e.g., if the rate of interest is 14% per annum, then r = 14/12/100=0.011667), n is loan duration in the number of months. When you apply for a loan, three key terms come into play: interest rate, loan tenor, and loan amount. Based on these features, the lenders calculate the value of monthly repayment, and that is known as EMI. The formula for calculating this amount is complex and leaves a large margin for error.
Miscalculations may lead to hassles, and you may land either paying higher EMIs or higher rates of interest. A sure solution to the same is the EMI calculator that helps you assess the loan amount, interest, and EMI accurately.
All you have to do is plug in your loan amount, interest rate, and tenor to calculate personal loan EMI, and you are sorted.
What an online personal loan calculator shows
- Firstly, you will be shown the EMI that is owed as monthly repayment. This can help you see if the loan is affordable for you.
- Secondly, you will be able to note the total interest payable on the loan, which helps you assess the cost of borrowing better.
- Thirdly, you will see the total payment, which is a sum of the loan amount you have borrowed, and the total interest levied on it.
- Finally, you will see an amortization or repayment schedule that depicts the break-up of interest amount and principal amount till the end of your loan tenor.
An online personal loan calculator allows you to accurately predict your potential monthly repayments, so you can make an informed decision before you apply. Since you can do multiple calculations with different loan amounts and tenors, this calculator helps you understand your debt obligations more clearly.