Know why it is important to calculate Personal Loan EMI beforehand and how to calculate it?
Know why it is important to calculate Personal Loan EMI beforehand and how to calculate it?
With the rising cost of living, personal loans have become a necessity in today's times. Gone are the days when people were dependent on their family and friends to get money in case of shortage of funds. Easy availability of personal combined with low EMI options, people are opting for this type of credit from banks, NBFCs and online lenders in India.
With the help of a personal loan, one can address any type of financial emergency without having to bear the stress of arranging funds. One can use the loan amount to cater to different types of financial needs including home renovation, payment of hospital bills, wedding expenses, education fees, purchase of a new smartphone or laptop, starting a new business and others.
Though a personal loan can be a great way to take care of urgent financial expenses, it does come with a repayment tenure that demands you to repay the lender in easy EMIs. Personal loan EMIs have to be repaid in flexible tenures every month.
Defaulting on personal loan EMIs can affect your credit score, thereby making it difficult for you to secure loans in future. Read this article to know why using a personal loan EMI calculator beforehand is important and how you can do so.
A personal loan is an unsecured loan which can be taken from a bank, NBFC or any financial institution to take care of personal financial needs. The loan is provided for a specific tenure during which the repayment has to be done.
The loan is of an unsecured type which means that the lender does not ask you to offer any of your assets such as mutual funds, jewellery, insurance policy, etc. and others as a collateral or security. The loan is disbursed depending on an individual's eligibility and credit score.
Lenders in India usually assess personal loan applicants age, income, employment status, residence type and various other factors. Any salaried or self-employed professional having minimum monthly income of Rs. 15,000 can avail this type of loan.
EMI stands for Equated Monthly Instalments which signifies that the money has to be repaid every month. Personal loan EMI means that the loan that you avail from the lender has to be repaid in flexible tenure every month.
The EMI is debited from your registered bank account and comprises of both the principal amount and the interest rate. Personal loan EMIs can be paid even through several payment getaways or through cheque and internet banking facilities.
To calculate the personal loan EMI, one needs to have correct details of the loan amount, tenure and the rate of interest levied.
The below formula can be used to calculate personal loan EMI
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formula, the letters stand for:
P is the principal loan amount
N is the repayment tenure
R is the rate of interest
Calculation of personal loan EMI is a time consuming and tedious process and also prone to human errors. Hence, using a personal loan EMI calculator is the right thing to do to save on time, effort and also to get an accurate amount.
It is important to calculate personal loan EMI beforehand due to the following reasons:
Find out the monthly cost of your loan
Plan your monthly financial budget keeping in mind the cost of the loan
To know your repayment capacity
Plan your future finances
Depending on the EMI calculated amount, you can reduce your loan amount, interest rate or repayment tenure
Ideally, when calculating the personal loan EMI, your EMI mustn't exceed 50% more than your monthly income. Opting for a short repayment tenure increases your EMI and on the other hand, a long repayment tenure decreases the EMI but attracts a high-interest rate.
Saves you from carrying out tedious calculations: One can calculate personal loan EMI in an excel sheet, but if the formula is not applied correctly then the calculation is likely to go wrong. The personal EMI calculator thus makes it easy to get accurate results in no time.
Calculate EMI in seconds: Manual calculation of EMI takes a lot of time, hence, you should check personal loan EMI calculator online which has incredibly reduced the amount of effort required for checking the applicable EMI on a personal loan.
Assess your repayment capacity: On entering the loan tenure, interest rate and loan amount, the EMI details are automatically displayed, thus making it easy for you to assess your repayment capacity. You can also vary the various parameters of the calculator to choose the EMI amount you can repay easily.
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