Get Personal Loan upto ₹10 Lakhs in 10 mins!

  • Employment Type

    Personal Loan: Why should you use an EMI calculator before raising a loan?

    Personal Loan: It is important to use a personal loan EMI calculator to keep your finances in order. There are three variables which directly affect the EMI. These variables are loan amount, loan tenure and the rate of interest

    Vimal Chander Joshi
    Published18 Oct 2024, 10:40 PM IST
    A personal loan EMI calculator is a handy tool that helps you change the EMI amount by changing the loan tenure and/or rate of interest
    A personal loan EMI calculator is a handy tool that helps you change the EMI amount by changing the loan tenure and/or rate of interest

    If you are planning to raise a personal loan, it is vital to ensure your finances are in order. For that, you are supposed to keep your monthly debt obligation within your budget. A slightly lower interest rate can bring down your EMI considerably. Alternatively, if you borrow a lower amount, your loan liability and monthly instalment will decline proportionately.

    There are essentially three variables that affect the personal loan EMI. These variables are loan amount, tenure of loan and the rate of interest. Using a personal loan EMI calculator, you can compute the monthly instalment after entering these.

    Let us understand how.

    Suppose you want to raise 10 lakh personal loan for three years at 10 per cent interest. After entering these figures into the EMI calculator, you can ascertain the EMI, which comes to 32,267. Now, if your maximum monthly commitment is, say, 25,000, what will you do?

    Also Read | How to compare personal loan offers from multiple lenders?

    The only option that you have is to extend the tenure of the loan.

    Using the Personal Loan EMI Calculator, you will find out that if you extend the loan tenure from 36 to 48 months, your monthly EMI will reduce to 25,362 from 32,267 (see the table below). 

    ParticularsScenario 1 Scenario II
    Loan               10 Lakh10 Lakh
    Tenure                 3 years4 years
    Interest        10%10%
    EMI                 32,267 25,362

    (Based on the calculations on the EMI Calculator)

    Let us take another example: suppose you want to raise 10 lakh, which is offered at 11.25 per cent per annum from lender ‘A’. You want to repay within 3 years. Now, after entering these figures into the EMI calculator, you will find that the monthly instalment is 32,857. 

    Now, lender ‘B’ offers you a better deal of 10.75 per cent interest. Using the calculator, you will find that the monthly instalment will decline to 32,620.

    ParticularsScenario 1Scenario II
    Loan          10 Lakh10 Lakh
    Tenure          3 years3 years
    Interest           11.25%10.75%
    EMI          32,857 32,620

    (Based on the calculations on the EMI Calculator)

    The monthly savings will turn out to be 32,857 (-) 32,620 = 237. Over a period of three years, this will accumulate to 8,532 (237 X 36).

    Now, you may want to change the lender from ‘A’ to ‘B’ because of your calculations on the Personal Loan EMI calculator. What if the additional processing charges are 3,000? 

    The net savings will fall proportionately then. Either way, we can make an objective decision based on the calculations arrived at via the Personal Loan EMI calculator.

    Also Read | Personal Loans: How not to fall prey to hidden charges?

    To sum up, we can say that a personal loan EMI calculator helps us calculate monthly instalment based on three variables which are loan amount, loan tenure and the rate of interest. 

    It helps the loan applicants ascertain the impact on their loan EMI if the loan tenure and/or rate of interest is altered.

    Catch all the Instant Personal Loan, Business Loan, Business News, Money news, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.

    MoreLess
    First Published:18 Oct 2024, 10:40 PM IST
    Business NewsMoneyPersonal FinancePersonal Loan: Why should you use an EMI calculator before raising a loan?
    Know your CIBIL Score for free
    Get Instant Loan at Low Interest Rates
    Bajaj Finserv
    Loan Amount Upto
    Upto 40 Lacs
    Tenure
    12-60 months
    Rate of Interest
    14% - 18%*
    Processing Fee Upto
    Upto 1.15% of loan amount
    Axis Bank
    Loan Amount Upto
    Upto Rs 50 Lacs
    Tenure
    12-84 months
    Rate of Interest
    starts from 16%*
    Processing Fee Upto
    1.5% of loan amount
    View More Offers
    Calculators
    EMI Calculator
    Calculate your monthly installment amount for a loan based on the principal, interest rate, and tenure
    Income Tax Calculator
    Choose the right income tax regime & discover your tax savings
    Best offers for you
    Personal Loans
    100% Digital, Zero Paperwork.
    Credit score
    Know your score for Free.
    HomeMarketsloanPremiumMint Shorts