How to optimise your personal loan EMI using a calculator

If you are planning to take a personal loan, it is recommended to find the optimum personal loan monthly instalment or equated monthly instalment (EMI). And it helps to use a personal loan EMI calculator to be able to calculate the right EMI.

There are three inputs required to be able to find the right monthly instalment. These inputs are the loan amount, loan tenure and rate of interest.

How to use the personal loan EMI calculator

I. Loan amount: The bigger the loan amount, the higher the EMI; and the smaller the loan amount smaller the EMI. So, if you want to pay a smaller instalment, one of the easiest ways to do so is to reduce your loan amount. But if you can not compromise on that, what will you do? You can consider the other two determinants.

II. Rate of interest: Another factor that influences the loan EMI is the rate of interest, which is charged on the loan. The higher the interest rate, the lower the EMI and conversely, the lower the rate of interest rate, the higher the instalment.

So, if you want to reduce your monthly instalment, you need to look for a loan which charges a lower rate of interest. For that, you need to look for a bank or non non-banking financial corporation which charges a lower interest.

III.Loan tenure: Finally, the last determinant which influences the instalment of a loan is its tenure. When the tenure of the loan is long, it would have a smaller EMI, and conversely, when the loan tenure is short, the loan would have a larger EMI.

So, a loan applicant can tweak these entries to compute the ideal EMI they are looking for. Let us understand this with this example. Suppose when you take a ₹5 lakh loan for two years, the monthly EMI would turn out to be ₹23,537.

As you raise the loan tenure to three years, the monthly instalment would decline to ₹16,607. But if your goal is to bring down the EMI to ₹13,500, you can raise the loan tenure to four years, following which your EMI would fall to ₹13,167.

5 benefits of using a personal loan EMI calculator

Five benefits of using a personal loan EMI calculator are briefly discussed below:

1. Accurate EMI estimates: It helps in calculating exact monthly payments based on loan amount, interest rate, and tenure. Hence, helps in choosing the best personal loan product.
2. Better budget planning: Calculation of exact monthly payments helps in aligning EMI payments in accordance with monthly income and expenses for smoother financial management.
3. Easy loan comparison: With this tool, you can compare EMIs from multiple banks such as HDFC Bank, SBI, and ICICI Bank and then choose the most logical and affordable option in your case.
4. Saves time and effort: The personal loan EMI calculator eliminates manual calculations. This helps in enabling faster personal loan decision-making.
5. Avoid repayment surprises: Clearly understanding your repayment schedule, structure and total cost of the loan in advance helps in making proper long-term repayment decisions. It also ensures that EMIs are not missed.

How to choose the right personal loan offer?

Selecting the right personal loan goes beyond just finding the lowest EMI. You should also look at factors such as the lender's reputation, repayment flexibility, pre-payment charges, and processing fees before applying for any particular loan. A thorough comparison helps in ensuring that you secure an affordable loan that fits your repayment capacity and financial aspirations.

Why does EMI planning matter for financial stability?

Hence, carefully planning your EMI repayment reduces stress. It helps in keeping the monthly budget balanced. Utilising a personal loan EMI calculator before applying for any personal loan forecasts payments accurately, avoids overborrowing, and ensures that a healthy credit score is maintained throughout the loan tenure.

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