How to Find the Affordable Loan with the Help of Personal Loan EMI Calculator?
A personal loan is money borrowed for a personal purpose, which could be anything from a vacation to a wedding or simply to buy something that you cannot immediately afford. You can enjoy it for the moment and pay back in installments. A personal loan EMI calculator tells you the exact amount you would need to pay as the monthly installment.
What Is an EMI calculator?
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An EMI calculator is an online tool created for the convenience of the borrower. It uses the variables applicable for your loan i.e. the loan amount, interest rate and tenure and calculates the EMI. You can calculate the EMI for any number of combinations of the three variables. It will help you decide on the loan amount you can afford.
What Is the EMI for Personal Loan?
Any loan is taken with a promise to pay it back with interest within a certain period of time through regular Equated Monthly Installments (EMIs). This amount must be paid by a fixed date every month. With each EMI, you pay up some amount of the principal and some amount of the interest charged on it. The amount of interest charged depends on the outstanding loan amount and you can calculate it using the personal loan interest calculator.
How Is the EMI calculated?
This EMI is based on three main factors
- The Loan Amount: As the loan amount goes up, the EMI value amount also goes up.
- The Rate of Interest: The value of EMI increases with the rate of interest.
- The Tenure: In this case, EMI decreases with the increase of the tenure.
There is a mathematical formula, which can be applied to calculate the EMI. For an easier approach, you can always use the personal loan EMI calculator.
How Do You Know Your Eligibility?
To check if you are eligible for a certain amount of loan, you can use the personal loan eligibility calculator. For this, you need to fill in a few details such as your name, date of birth, income details and any existing EMIs. Once these details are filled, you can find out your eligibility status.
The factors that affect the approval of the loan are your credit score, your employment status, your annual income and your previous records of EMI payments
How Does the EMI Calculator Work?
An EMI calculator has three fields of variables, which you need to fill in. These are the same as the three factors that affect the EMI. As you enter the values for the variables, the EMI calculator tells you the value of the EMI. It will also show you the total amount of interest that you would be paying over the number of years as a value and as a percentage of the total prepayment amount
What Are the Components of an EMI?
The EMI has two components. One is the interest and the second one is the principal. In the initial EMIs, you pay more interest and the component of the principal is small. As you continue to pay the EMIs, the interest component becomes smaller and the principal component becomes larger. This happens because the EMI value is fixed and the interest is calculated on the outstanding principal. As the principal is high in the beginning, the interest charged is also high. As you slowly pay up the principal, the interest starts reducing.
How Does the Interest Rate Vary?
The interest rate charged for the personal loans is higher than that for any other loan. The reason behind this is the lack of security for the lender. The rate can be affected by some other features such as your income and your credit score. In case you are borrowing from a bank, the gender and previous alliance with the bank could have an impact
How Does the EMI Calculator Help You Decide on the Most Affordable Loan?
As mentioned earlier, the Personal Loan EMI calculator helps the borrower to calculate the EMI and you can calculate it for all the combinations of the loan amount that you may have in mind. When you see the EMI, you can decide whether or not you can afford to pay that EMI for the term period of the loan. If it is high, you can try and reduce the loan amount. Similarly, if you feel you can afford to pay out more, you can either increase the loan amount or reduce the tenure. You can keep repeating the process until you find a combination that suits you.
Additional Read- Benefits of SBI Personal Loan Calculator
You should also check the total amount of interest payable over the years as a percentage of the total amount to be repaid. If you are paying more interest than the actual principal amount, you should rethink your decision.
Since different lenders charge different rates of interest, you can also compare the same across lenders. Hence, by checking the EMI and the interest component for different values, you can find the most affordable one.
Apart from being able to help you choose the most affordable personal loan as discussed above, the personal loan EMI calculator has the advantage of being quick and accurate. Along with the EMI, it also calculates your interest payable. It helps you compare the loan offers from different lenders as well. One big advantage of the EMI calculator is that it is free and simple to use. With the personal loan calculator, India and its population are becoming better equipped to handle its finances.