Before delving into the nitty-gritty related to the calculation of personal loans EMI, let us understand what a personal loan is.
Personal loan
A personal loan is a short or medium-term unsecured loan that assists an individual in meeting the current financial needs. It is provided based on key criteria such as income level, credit and employment history, etc. An individual is not required to provide anything in the form of collateral while availing a personal loan. It can serve the purpose of managing the travel costs, financing education, wedding expenses, expenses of a medical emergency, home renovation, debt consolidation, and others. An individual can obtain the personal loan up to Rs. 25 lakhs, and it has a flexible tenure of upto 60 months.
Personal loan calculator
When an individual takes a personal loan, the equated monthly instalment or EMI is a crucial factor in estimating the loan amount and repayment tenure. The personal loan EMI calculator assists one in instantly calculating ones pay-outs and, therefore, decide on one’s loan and repayment in a better way.
Some of the important points one should be aware of about the Equated Monthly Payments are:
1. Personal loan EMI formula
The formula used by the personal loan EMI calculator is:
EMI = [P x (R/100) x {1+(R/100)}^N]/[{1+(R/100)}^(N-1)
Where,
EMI – Equated Monthly Payment
P- Principal amount
R- Rate of interest
N- Number of years
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2. EMI include the interest and principal amount
One of the crucial things to understand is EMI or equated monthly payment means that the amount paid for repayment always remains equal. It includes both interest and principal amount. Initially, one pays more towards the interest amount and less towards the principal amount, but as the tenure increases, this relationship changes, and the individual spends more towards principal and less towards interest.
3. Note that EMI must be less than 40% of your income
An individual must make sure that the EMI payment must not exceed the upper limit of 40% of the monthly salary. The rationale behind this logic is, every individual has a fixed salary, and he has to meet some obligations. Further, there can be some unforeseen circumstances. The upper limit of 40% will easily allow the individual to meet the requirements, face the unexpected event, pay EMI.
4. Opt for the online calculator to calculate the EMI
Though one can calculate EMI manually, it is still advisable to calculate it using the Personal loan EMI calculator. The EMI calculator helps one to calculate one the EMI in a matter of minutes and assist in doing away with the complex calculations. You can calculate the EMI in your loan at Myloancare. The online calculator will assist you in planning your loan better by telling answering you about your EMI payments on different interest rates, loan amounts, and loan tenures.
5. Interest rate will rely on different factors
The rate of interest for a personal loan can differ for each borrower. These rates can vary from 12% to 24%, depending on how well the borrower meets the lender’s eligibility criteria. That is the reason why two borrowers can get different interest rates even from the same lender. The factors influencing the interest rate are credit score (higher the credit score, lower the rate, and vice-versa), the income of the buyer, the relationship between the bank and the borrowers.
