A personal loan is a credit instrument that is increasingly becoming popular as it is an unsecured loan. This means you don’t have to submit or pledge any assets as security to get a personal loan.
The best part is that you can use the borrowed funds without restrictions. Personal loan disbursement is also very quick and is usually done within one or two working days after approval. When you take a personal loan, lenders apply an interest rate on your personal loan amount.
You must pay the principal amount and the calculated interest during the repayment tenure. So, assessing your loan amount, tenure and interest rate is crucial before applying for the loan. These parameters decide your instant personal loan EMI you have to pay every month.
But how is EMI calculated for personal loans? Read on to learn about it and the benefits of using an EMI calculator.
To calculate your personal loan EMI manually, you need to use the following formula:
E = P x R x (1+r)^n/((1+r)^N – 1
In this formula,
If you decide to do the manual calculation, you will have to convert the values for ‘R’ and ‘n’. For ‘R’, you will need the monthly interest rate and ‘n’ will have to be the tenure in months.
Considering these requirements and the complexity of the formula, there is the risk of human error. This can impact the decisions you make regarding the loan. Moreover, these calculations are cumbersome to perform, which may deter you from adjusting the values for the variables.
Here are some advantages you enjoy when using an EMI calculator.
Once you have gathered all the information on the amount to be repaid every month, planning your expenditure and savings becomes much easier. You can also chart out all your pending or future loans using the EMI calculator. Accordingly, you can plan to prepay or even save a little extra for future expenses.
EMI calculators allow you to choose the best-suited tenure for your loan. For instance, if you wish to save on interest, you will find that a shorter tenure works best. Alternatively, if you want affordable EMIs, a longer tenure is ideal.
Updated knowledge of your monthly outgo will always help you maintain a good credit score. If you know the EMIs payable before you borrow, you can plan to ensure that repayment goes smoothly. This is important as it is crucial as any delayed payment can hurt your credit score.
The interest you must pay is the foremost point to check out when taking a personal loan. The interest rates vary from one lender to another. The calculator makes it significantly easier for you to compute and evaluate different rates and highlights monetary differences between two options.
The calculator helps you assess whether or not you are eligible for the loan based on the information you provide. All you have to do is enter the loan amount that you plan to borrow, the applicable tenure and the interest rate. Based on the EMI, you can know if the loan is one you can handle or not.
The EMI calculator is a free tool available on most lenders’ websites. You can access it anytime for free. For instance, you can use the Fibe EMI calculator to evaluate your loan terms and repayment capacity before applying for a loan.
So, worry no more by wondering, “How is EMI calculated for a personal loan?”. Availing a loan for all your expenses, be it shopping, travel, or education, is now convenient with Fibe.
With fast disbursal and affordable interest rates starting at 2% per month, you can easily get a loan for a maximum amount of up to ₹5 lakhs. To get started, download the Fibe Personal Loan App or register on our website.
A personal loan EMI is calculated based on the:
The EMI for personal loans is calculated using a mathematical formula:
E = P x R x (1+r)^n/((1+r)^N – 1. Here, ‘P’ is the Loan amount, ‘R’ is the interest rate and ‘n’ is the tenure.
Calculating your EMI manually is not only time-consuming but prone to errors. So, using a calculator lets you compute your monthly instalments instantly.
Here are a few key benefits of using this free digital tool: