What is Personal Loan EMI Calculator & How it Works?

What is Personal Loan EMI Calculator & How it Works?

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1 September 2022

A personal loan is the most convenient loan you can take from a bank to meet your financial emergencies. The simple procedures and minimum wait period make it the first preference of people. Moreover, the reason to take this loan is not limited to a single purpose. You can use the personal loan fund for home renovation, marriage, vacation, repaying debt, etc. In addition, timely payment of loan instalments is great for improving your creditworthiness. For this, it becomes crucial to calculate personal loan EMI and take the necessary steps to make payments on time.

What is EMI Calculator for Personal Loans?

EMI calculator is an automated tool that calculates the monthly instalments by considering the personal loan rate of interest, principal amount and loan tenure. By using this tool, you can quickly calculate personal loan EMI simply by entering the numerical details of the loan. This tool is crucial for deciding on which loan is suitable for meeting your financial requirement and providing greater flexibility of repayment.

Importance: Calculate Personal Loan EMI

A personal loan EMI calculator helps you determine if your financial status is suitable to avoid default during loan repayment. It simplifies the personal loan rate of interest by translating it in terms of monetary amount. Through this process, a borrower is able to compare personal loans of different lenders and select the one that doesn’t affect their monthly income and expenditure.

Formula: Calculate Personal Loan EMI

To use the EMI calculator accurately, you must understand the formula to calculate personal loan EMI

EMI = (P R (1+r)^n)/((1+r)^n-1)

In this formula, P represents the principal loan amount, R is for the personal loan rate of interest, and n is for the total tenure of the loan in months. To understand the working of the formula, here is an example:

Suppose you take a loan of ₹ 1 lakh at a 10.75% personal loan rate of interest for 12 months duration. Once you calculate personal loan EMI, you will figure out that you need to pay ₹ 8,827 every month to complete the loan in 12 months. 

Steps to Calculate Personal Loan EMI

The EMI calculator utilises the number you enter to provide the amount of monthly instalments you need to pay to clear the loan amount in the given tenure. This AI calculator requires the personal loan rate of interest, tenure, and basic loan amount to provide the calculated result. Following are the steps you need to follow to know the EMI amount in a click:

  1. Enter the amount you want to borrow from the bank.
  2. Give the personal loan rate of interest that the bank offers in a plan.
  3. Finally, provide the tenure of the loan. 

When you click the submit button, the resulting page displays all the details of the loans. These include the total amount you need to pay at the end of loan tenure, the amount of monthly instalments, and the total interest amount.

Benefits of Online EMI Calculator

There are multiple benefits of using an online personal loan EMI calculator, such as:

  • It breaks down the monthly payment and total interest you need to pay for a personal loan.
  • It removes all the errors of human EMI calculation.
  • Online EMI calculation is a quick way of knowing the monthly amount payable for taking a loan.
  • You can compare various personal loans to make an efficient choice. 

Conclusion 

When you take a personal loan, the lender notifies you about the fixed date for the EMI payment every month. To avoid any forgetful default of loan repayment, the NACH mandate automatically debits the instalments from your linked bank account. However, to avoid a monthly financial crisis, you must take a loan by evaluating the EMI of a loan.  

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