Personal loan EMI is acertain amount that the personal loan borrower pays to the lender each month on a specified date for a certain period. EMIs pay off the interest as well as the principal amount. The personal loan EMI calculation depends on 3 factors – the personal loan amount, the personal loan interest rate and the personal loan tenure.
How a Personal Loan EMI Calculator Works
A personal loan EMI calculator is used to calculate the amount of EMI that the borrower needs to pay the lender every month. It is a handy tool that calculates the EMI amount based on the details you enter. The details you need to enter in a personal EMI calculator is as follows:
Personal Loan Amount: The total amount you borrowed is your loan amount.
Interest Rate: There are two types of personal loan interest rates,fixed and floating. In fixed interest rate loans, the interest rate doesn’t fluctuate and remains the same throughout the loan tenure. That means, all the EMIs till the loan is paid off will be the same. However, the floating interest rate can vary, and hence the EMIs vary from time to time according to the fluctuation in the base rate.
Personal Loan Tenure: It is the time period chosen by the borrower to repay the loan. Most banks offer flexible loan tenure. That means, the borrower has the power to choose the loan tenure, which usually ranges from 1 to 5 years.
Once these details are entered in the personal loan EMI calculator, it then works on two arithmetic formulae – a simple calculation to calculate the interest and a complex calculation to calculate the personal loan EMI.
The EMI Calculation Formula
EMI = [P x R x (1+R) ^N]/[(1+R) ^N-1],
P stands for the principal loan amount.
R is the interest rate per month.
For e.g. assuming that the interest rate per annum is 13%, then the rate of interest will be 13/ (12 x 100).
N is the numberof monthly instalments.
How EMI Breakups are Done in Personal Loans
A few things you need to keep in mind about EMI breakups in a personal loan:
EMI is the monthly payment you make to repay your loan.
A personal loan EMI includes the principal amount and interest amount.
The interest rate applied to your loan amount is distributed throughout your loan tenure.
The interest amount will be high during the initial period of your loan tenure. As you come towards the end of the loan tenure, your repayment will pay the interest amount less and the principal amount more.
Benefits of Using a Personal Loan EMI Calculator
Does tedious calculations easily – saves your time and energy.
Calculates your personal loan EMIin seconds – quick and reliable.
Helps you to assess your repayment capacity – helps to plan your finances well.
Displays a consolidated list of the best personal loan offers – helps you make informed decisions.