EMI Calculator for Personal Loans: A Must-Have Tool Before You Borrow

In today’s digitally forward India, financial technology (fintech) companies, which are essentially non-banking financial companies (NBFCs), have taken over the majority share of personal loan disbursements. In fact, in the first quarter of this year, fintech companies in India disbursed a total of ₹5.3 crores in personal loans. However, you must always be careful when taking personal loans. To help you calculate how much such a loan is going to cost you, you can use a personal loan EMI calculator.

What Is a Personal Loan EMI Calculator?

It is a digital tool or even a web-based application that you can access through your computer or smartphone. This tool helps you calculate the Monthly Equated Instalments (EMIs) you have to pay for a personal loan. 
Calculating EMIs involves a complex formula. In the busy humdrum of modern urban life, it is not always possible to calculate this manually. This is where a personal loan EMI calculator comes into play. By simply entering the loan amount, the interest rate, and the loan tenure, this tool automatically calculates the EMI amount.

How Does It Work?

To understand how this EMI calculator works, you need to learn the standard mathematical formula for computing the Monthly Equated Instalments. The formula is as follows:

Here, ‘P’ refers to the principal or the loan amount, ‘r’ refers to the monthly interest rate levied by the lending institution, and ‘n’ refers to the number of monthly instalments you must pay to fully repay the loan plus interest. 

Steps to Use a Personal Loan EMI Calculator

To use this calculator effectively, here are the steps you need to follow. 

• Start by entering the ‘P’, that is, the amount of personal loan you wish to apply for. 
• Next, enter the value of ‘r’, that is, the rate of interest charged by the lending institution (whether a bank or an NBFC). 
• After this, enter the value of ‘n’, which is the number of months for which you wish to continue repaying the loan amount.
• Finally, press the ‘Calculate’ button, and the calculator will automatically calculate the EMI amount you need to pay each month. 

Advantages of Using a Personal Loan EMI Calculator

Using such an EMI calculator is quite beneficial for anyone wanting to take a personal loan. Here are some of the benefits you can avail yourself of if you use an EMI calculator before taking a personal loan. 

• It Gives You Financial Clarity

Using a personal loan EMI calculator can give you additional financial clarity when planning to take a personal loan. When you see the actual EMI amount you have to pay, you can plan your monthly budget accordingly. This can reduce your chances of missing EMI payments.

• It Helps Compare Loan Offers

You can even use an EMI calculator to check the monthly EMIs for personal loans offered by different lending institutions. The rates of interest vary from lender to lender. So, an EMI calculator can help you compare and choose the best lender. 

• It Helps Take Informed Decisions

Instead of impulsively taking a personal loan, you can use an EMI calculator to check the monthly EMI amount. This will let you understand whether the loan amount or tenure needs to be increased or decreased, depending on    your current financial capability. 

• It Helps Saves Time

More importantly, a personal loan EMI calculator can save you time. You no longer need to manually calculate your monthly EMIs tediously using the EMI formula. The EMI calculator does this for you so you can spend your time on more productive tasks.

A Must-Have Tool Before You Borrow

With pre-approved loan offers, taking a personal loan has become quick and easy today. However, you need to be mindful of high interest rates. Using an EMI calculator, you can calculate the EMIs to see which offer gives you the lowest monthly instalment. 
Using this tool, you can even adjust the values of loan amount and loan tenure to customise a loan offer according to your repayment capacity. Overall, this promotes a high level of financial responsibility and discipline. These are some of the reasons that a personal loan EMI calculator is a must-have tool for first-time borrowers.

The Takeaway

In conclusion, using an EMI calculator before borrowing has its perks. It can help you in financial planning and even help prevent you from taking on more than you can afford to repay. By keeping a personal loan EMI calculator handy, you can avoid falling into a debt trap when taking a personal loan. 

Disclaimer:

This article is from the Brand Desk. User discretion is advised.