A personal loan can be of much help to those who require immediate funds. Since a personal loan is a type of unsecured loan, borrowers are not required to submit any collateral or security to the bank. However, once you take the loan, you should ensure that you pay the Equated Monthly Installments (EMIs) as per schedule.
If you happen to default on your repayment, your credit score will be adversely affected. Thus, it is important to check whether you can afford to take a personal loan before applying for it. You can do this by calculating your monthly payable EMI. If the EMI is too high, you can either bring down the loan amount or increase the loan tenure to make the monthly repayments more affordable.
EMIs can be calculated manually or by way of an EMI calculator tool. Read on to know more about how the EMI is calculated for personal loans.
How to Calculate EMIs for Personal Loans
The EMI is a certain amount that you, as a borrower, will have to pay to the lender on a monthly basis once you take a loan. When calculating the EMI payable, banks/financial institutions primarily take three variables into account – the loan amount, the interest rate that you are charged for the loan, and the tenure of the loan. In addition to these variables, the nature of your employment, your credit score, other outstanding loans that you might have, etc., may also play a role in determining your payable EMI. There are three ways through which you can calculate your monthly EMI payable, which are as follows:
Manual Method: To calculate your personal loan EMI manually, you can use the formula listed below:
EMI = P x R x (1+R)^N / [(1+R)^N-1]
In the formula mentioned above, P is the principal amount, R is the rate of interest, and N is the number of monthly installments.
The risk with manually calculating your personal loan EMI is that there is always a chance that you may arrive at an erroneous figure simply due to human error. Thus, if you wish to avoid this, it is advisable to use a personal loan EMI calculator.
EMI Calculator Tool on the Lender’s Website: Most banks and financial institutions offer an EMI calculator tool on their official websites. To use this tool, you will need to visit the official website of the lender, click on the ‘Personal Loan’ tab, and key in the required details – loan amount, interest rate, and loan tenure in years. Once you enter these details, the EMI payable will be displayed. In most cases, you will also be able to view the break-up of the total payment, i.e. the principal amount, the interest amount, and the total amount that is payable. The amortization schedule will also be displayed to you. If you wish to compare the EMIs quoted by different lenders, you will need to visit individual websites of banks/financial institutions and key in these details into each lender’s website or use a third-party financial services website.
Through a Third-Party Financial Services Website: You can also calculate the payable EMI through a trusted third-party aggregator website like BankBazaar.com. To do so, you will be required to key in your loan amount, loan tenure, interest rate, and the processing fee. You will also need to indicate if you wish to make pre-payments during the repayment tenure. Once you do this, you will be able to view your EMI payable.
is that you can compare the EMIs quoted by different lenders on the same webpage.
Benefits of Using an EMI Calculator
Helps You Plan Your Finances: Once you know how much you will have to pay on a monthly basis to your lender, you can make the required changes to your financial plan and decide how much of your monthly pay can be saved/invested.
Accurate: An EMI calculator tool gives you accurate information. Given that the calculation is automated, you don’t have to worry about the possibility of making errors while calculating the payable EMI.
Convenient: As stated above, it is also extremely easy to use an EMI calculator tool. When using the tool, you only have to input your loan amount, the interest rate, and the loan tenure, after which the EMI will be displayed.
Eases Comparison: Calculating the EMIs quoted by different lenders manually is quite a time-consuming process. In comparison, when you use an EMI calculator tool, the payable EMI will be displayed to you in a matter of seconds, thus making the comparison process much easier and time-efficient.
The Bottom Line
While a personal loan is a great way to receive immediate funds when a financial requirement arises, you should ensure that you are able to repay the loan, without missing any EMI payments. If you miss paying the EMIs as per the specified schedule, your credit score may be affected, which could, in turn, make it difficult for you to avail loans in the future. For this reason, before you take a personal loan, make sure to check your eligibility and calculate your payable EMIs. It is advisable to not spend more than 30% of your income on EMIs. This will ensure that you have a good amount of money left to save or make investments. If you find that the payable EMI is too high, you should try to either opt for a lower loan amount or a longer loan tenure, if such an option is available, to keep the EMI payments reasonable.
How you can carry extra fuel on a motorcycle?
7 Things You Should Know About Invisalign
Zirconia Dental Implants vs Titanium Implants
What are The Uses of Excel in Our Daily Life?
Four Effective Tips for Starting a Small Business
How Vehicle wrapping can enhance our business?
6 Things To Know About California Consumer Protection Act
Aerobic Exercise Benefits, Types, Steps & Examples
Why Is Education The Key To Success?
How to better understand the quality of trailers?
Best Cities for Families – 2020 Edition
Awesome DIY Ideas To Reuse Custom Cardboard Boxes
Why MSBI (Microsoft Business Intelligence) is the ultimate tool
Working in the Motor Trade: What Are Your Options?
Let this be your year- Habit changes to improve your life
Know How you can Increase your Retirement Fund by 54%
How to Raise Money to Purchase an Industrial Property
5 Tips for Installing a New Fence
Personal loan for low salary individuals
12 Interesting Facts About Rishikesh: Yoga Capital of the World
- Home Improvement3 years ago
How To Decorate Home With Vintage Home Accessories
- Technology1 year ago
The Trend of Android TV Box
- Finance2 years ago
Get Ready Before it is too late! Hire a Tax Specialist to Get Your Taxes Prepared
- Home Improvement2 years ago
Best Roof Design for Snow
- Digital Marketing1 year ago
5 Not Obvious Ways to Promote Your Blog
- General2 years ago
What Makes XLPE Insulation so Special for Users?
- Digital Marketing1 year ago
Remarketing Made Simple: A Step-by-Step Guide
- How To2 years ago
Guilty of Making These Blunders While Designing Posters?