Managing your monthly personal loan (PL) repayments effectively is crucial to maintaining financial stability. Planning in advance is a key strategy to ensure this, however, navigating through complex spreadsheets and manual calculations can be time-consuming.
This is where a personal loan EMI calculator becomes essential. With this tool, you can perform quick, accurate calculations to plan your repayments efficiently.
In this article, we’ll explore how an EMI calculator for a personal loan works, the benefits it offers, and how to use it efficiently. We’ll also discuss the key factors that will influence your monthly EMIs and provide tips on how to reduce them.
What Is a Personal Loan EMI Calculator?
A personal loan EMI calculator is a digital tool that helps you calculate the Equated Monthly Instalment (EMI) for your loan. By entering your loan amount, interest rate, and tenure, the calculator provides you with the monthly EMI payment, along with the total amount payable over the life of the loan.
The formula for calculating EMIs is:
EMI = [P x R x (1+R)^N] / [(1+R)^N-1]
where:
- P = principal loan amount,
- R = monthly interest rate (annual rate divided by 12),
- N = loan tenure in months.
Please note that the EMI calculator does not account for any value-added services, such as insurance, that you may have availed of along with the loan.
Steps to Effectively Use a Personal Loan EMI Calculator
Let’s walk through how to use the personal loan EMI calculator provided by SMFG India Credit, a leading NBFC (Non-Banking Financial Company) in India:
- Set the Loan Amount: Enter the amount you intend to borrow. At SMFG India Credit, loan amounts range from INR 50,000* to INR 30,00,000*.
- Enter the Interest Rate: Input the interest rate at which the loan will be charged. Please note that the final interest rate will be determined by the lender based on factors such as credit score, income, and lender policies at the time of loan application.
- Set the Repayment Tenure: Select your preferred loan tenure. Longer tenures may lower your monthly EMIs but increase overall interest costs, while shorter tenures can require higher EMIs but reduce the total interest paid. Typically, lenders offer a tenure between 12-60 months.
Once these details are entered, the EMI calculator will instantly display the calculated EMI, the total interest payable, and the total amount payable over the life of the loan.
Example Calculation:
Suppose you are borrowing INR 20 lakhs at an interest rate of 13% per annum over a 36-month tenure. By entering these variables into the PL loan EMI calculator, you will get the following results:
- EMI: INR 67,388
- Total Interest Payable: INR 4,25,964
- Total Amount Payable: INR 24,25,964
For sound monthly budgeting, it’s important to factor in your existing expenses and savings along with the estimated EMIs.
Why Using a Personal Loan EMI Calculator Is Beneficial
An EMI calculator for a personal loan offers several advantages:
- Saves Time and Minimises Errors: Manually calculating EMIs can be time-consuming and prone to errors. Using a personal loan EMI calculator reduces these risks, providing accurate results instantly.
- Helps Budget in Advance: Personal loans usually have a fixed repayment schedule. Knowing the exact amount you’ll pay each month allows you to plan ahead, ensuring it fits within your budget alongside other expenses.
- Flexible Experimentation with Loan Terms: You can experiment with different loan tenures, interest rates, or amounts to see how they impact your EMI and total interest, helping you make informed borrowing decisions.
- User-friendly Interface: EMI calculators are designed to be easy to use, even for those with little experience in financial calculations.
Factors That Influence Your Personal Loan EMIs
The following factors have a significant impact on your EMIs:
- Loan Amount: The total amount borrowed directly affects your EMI. Larger loan amounts naturally result in higher EMIs, as the principal to be repaid is greater.
- Interest Rate: Higher interest rates generally increase your monthly payment, as more interest is charged on the loan amount.
- Loan Tenure: Shorter tenures may lead to higher EMIs but reduce the total interest paid over the life of the loan, while longer tenures lower the EMIs but result in higher interest costs.
Although they may not be directly a part of the EMI, other charges associated with personal loans, such as processing fees and prepayment penalties, can affect the total loan cost. Be sure to take these additional fees into account when assessing your loan options.
Tips To Reduce Your Personal Loan EMIs
Consider following these tips for lower EMIs:
- Opt for an Extended Tenure: A longer tenure can reduce the EMI, though it can increase the total interest paid over the loan term. Using a personal loan EMI calculator provides detailed insights into the cost implications of different tenure options.
- Negotiate for Lower Rates: If your credit score is strong (typically above 750) and you meet your lender’s eligibility requirements, negotiating for a lower interest rate can reduce your EMI amount.
- Borrow a smaller amount: It is advisable to only apply for the amount one needs, and not go for a loan amount that’s unnecessarily large.
- Consolidate Debts: If you already have an unsecured loan, or credit card EMIs, it would be wise to consolidate all these debts with a single personal loan. This could reduce your overall EMI burden, and also enable you to manage your loans better.
Conclusion
With the help of a personal loan EMI calculator, you can evaluate your repayment obligations before committing to a loan. By factoring in your existing expenses and future financial goals, you can better position yourself to manage monthly payments. Additionally, always remember to experiment with different loan terms and compare options from various lenders to make well-informed borrowing decisions.
*EMI calculators only tell you an estimated figure. Your actual EMI, interest rate, and other
loan terms will depend on your eligibility and the lender’s policy at the time of the loan
application.
