If you are contemplating availing of personal loans, then calculating personal loan EMI beforehand will help you manage your debts efficiently. You can calculate personal loan EMI manually or use a pre-built online personal loan EMI calculator.
Factors to be considered for EMI computation
The total loan amount borrowed from a lender is known as the loan principal. The higher the principal, the higher will be your EMIs and vice-versa. Thus, you may avoid borrowing excess credit to keep your EMI outgo in check. 2. Loan tenor The lower the loan duration, the greater the EMI will be, but the lower will be the total interest payable and vice-versa. For example, you borrow two personal loans of Rs 10,000 each at 10% p.a for 12 and 24 months respectively. The 12-month loan EMI will be Rs 879 and the 24-month loan EMI will be Rs 461. However, the total interest payable on the 12-month loan is lower (Rs 550) as opposed to that on the 24-month loan (Rs 1,075). 3. Interest rate Interest rate is your debt servicing cost. There is a direct relationship between interest rate and EMIs. If interest is low, EMI will also be low and vice-versa. Thus, you may always try to procure loans at the minimum possible interest rate. The formula for manually calculating personal loan EMI EMI = [ P X R/100 X (1 + R/100)N ] / [ (1 + R/100) N-1 ] Where, P = Principal loan amount R = Loan interest rate N = Loan duration (in month) EMI = Equated Monthly Installment Other ways of calculating personal loan EMI Manual computation of personal loan EMI is a complex, cumbersome, and time-consuming process. Thus, you may use online personal loan EMI calculators available on various websites for instant and accurate EMI computations. You may also refer to the amortization schedule provided by your lender. It provides EMI breakup details, that is, how much of the monthly installment is designated for interest and principal repayment respectively. You may calculate personal loan EMIs using any of the methods stated above. The key to lowering your EMIs is to get small personal loans at competitive interest rates. Bajaj Finserv offers one of the best personal loan rates along with pre-approved offers for select customers that will accelerate your loan approval process.
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AuthorAman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management. |