Personal Loan EMI Calculator
Considering the multiple uses of personal loan, there is no doubt in the fact that there has been an ever increasing demand for personal loans in the Indian debt industry. The amount borrowed from a personal loan can be put to multiple uses, such as sponsoring a vacation, hosting a wedding or any other event, paying for education, renovating or building a property, etc.
Understanding Personal Loans
The following points explain personal loans in complete detail-
- Unlike credit cards or other forms of borrowing money, personal loans offer one-time payment of cash to the borrowers
- The borrowed amount can be paid back to the lenders in the form of monthly installments over the course of loan duration, also known as the ‘term’
- With the increasing demand for personal loans, it has become quite easy to apply for a loan and get approved for it
- The loan approval process, however, may take up to one business week, depending upon the time taken by the lender in the processing of documents and other proofs
- For the amount lent by the financial institutions, the borrowers are charged a fixed rate of interest on the loan amount (also known as the principal amount)
- Apart from the interest, the borrowers may also have to bear other expenses such as the origination or administration fee
- It is important to note that borrowers have the option of repaying their loan amount before their actual term. However, doing so, the borrower will have to pay an early payoff penalty for paying the loan before the actual loan duration
What is the use of a Personal Loan EMI Calculator?
A personal loan EMI calculator helps you calculate the amount of monthly installments that you’d be paying on your personal loan.
The personal loan EMI calculator makes use of the factors such as the actual loan amount, loan tenure and the applicable rate of interest on the borrowed amount to calculate your EMI amount.
A personal loan EMI calculator actually works on the following formula-
EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)]
EMI stands for Equated Monthly Installment
P refers to the principal amount, or the actual amount borrowed
R refers to the rate of interest on the loan amount (to be calculated monthly)
N stands for the loan duration; meaning the time period in which the loan amount must be repaid (to be used in terms of months)
Let’s take an example to understand this better-
Suppose, you take a personal loan of Rs. 10 lakh for 2 years at a rate of interest of 20% p.a.
Now, since the rate of interest and loan duration given above are in different units, we need to first convert these
Loan duration in months - 12*2 = 24 months
Monthly Rate of interest - 20/12 = 1.66% p.m.
Now, using the above formula-
EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)]
EMI = [10 x 1.66 x (1+1.66)^24]/[(1+1.66)^ (24-1)]
EMI = Rs. 50,896
An EMI calculator uses the above formula to calculate the EMI on personal loan in seconds. When using an EMI calculator, you don’t need to go through such long calculations of converting different units of loan tenure or rate of interest into months. Neither do you need to use such a formula to do the calculations by yourself.
You simply need to enter the three basic details related to your personal loan, and you will see your EMI amount within seconds!
Frequently Asked Questions
What is a personal loan?
A personal loan is a fixed amount of money borrowed from a financial institution for the purpose of meeting all the personal expenses. This amount is borrowed from the lender at a fixed rate of interest, and for a pre-defined time period.
What is a personal loan EMI calculator?
A personal loan EMI calculator is a tool that allows you to calculate your monthly installments on the loan amount. To calculate your EMI through the personal loan EMI calculator, you need to enter your loan amount, loan term and the rate of interest on your loan.
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