5 Ways a Personal Loan EMI Calculator Helps You Plan Your Finances


11 Oct 2020 | 5 min read

Personal loans come to everyone’s rescue in a financial emergency. No restrictions on the end-use of a personal loan make it the most preferred option for individuals who are facing problems in meeting their personal expenses like home renovation, wedding, education expenses, as well as big-ticket purchases. 

However, a personal loan, just like other forms of credit, needs to be paid back along with applicable interest. Borrowers are required to repay a personal loan in monthly instalments, popularly known as EMI (Equated Monthly Instalments). Before applying for a personal loan or home loan, you should have an idea about how much EMI you would need to pay per month to make sure that it fits into your budget. For this, you can use a personal loan EMI calculator. Not only does a personal loan EMI calculator help you figure out the monthly instalment, but also in planning your finances accordingly. There are other calculators such as loan principal and interest calculator, loan tenure calculator, etc. to calculate the principal and interest rates in some exceptional cases. 

Here is how a personal loan calculator can help you plan your finances:

1. For an accurate and quick calculation

Calculating EMIs using pen-and-paper is a tricky and time-consuming task and leaves room for errors. Whereas an online personal loan calculator can deliver accurate results immediately. EMI calculators are designed using a sophisticated algorithm to deliver error-free results in seconds. Additionally, you can use an online personal loan EMI calculator as many times as you want to, without any charges. You can also calculate your instalments for a personal loan using a mobile EMI calculator anytime, from anywhere. It is easy to use; all you have to do is type the principal amount, interest rate and the loan tenure to compute your EMIs. It will help you figure out whether your monthly outgo as an EMI is in line with your income so that you can decide the tenure and loan amount accordingly before you apply for the loan.  

2. Helps in deciding the tenure

EMI calculator allows users to find the right tenure as per their repayment capacity. You can change the value of loan paraments as many times you want to. You can increase and decrease the loan amount and tenure to arrive at an EMI that is the best suited based on your income. For example, if you think the monthly instalment is higher than what you can afford, you can increase the loan tenure or decrease the loan amount to arrive at a suitable EMI. Whereas, if you think you can pay more, you can decrease the loan tenure. You can change the values until you reach the right instalment based on your repayment capacity.  

3. For selecting the right lender

Interest rate is one of the most important components of the loan. While calculating an EMI, you need to enter the interest rates charged by your lender. Interest rates, loan amounts and tenures vary from lender to lender. Even a marginal difference of 0.5% in interest can make major changes in the overall cost of the loan and instalment payable every month. You can use the personal loan calculator to find the difference between the costs of the loan by entering the interest rates charged by different lenders. You can compare rates and shortlist viable lenders to find the most affordable lender. Apart from interest rates, you should also check tenure and loan amount for a satisfying borrowing experience.   

4. For a loan amortisation schedule

A loan instalment payment includes both principal and interest. When you use the EMI calculator, a loan amortisation schedule shows the breakdown in detail i.e. how much principal as well as interest you are paying each month. If you are planning to prepay or foreclose a personal loan, it will help you to find out how much you can save in the form of interest from prepayment. So, you can plan in advance and take beneficial decisions. 

5. Visual representation of figures

With an EMI calculator, loan borrowers can easily find out how much they have paid and how much they have to pay each month including the principal as well as the interest rate. They can view the information in a tabular form and pie chart as well. For example, if you apply for a personal loan of Rs. 15 lakh at 15% p.a. interest for 60 months, the total amount that you will need to pay will be Rs. 21,41,093. Out of which 70.1% goes towards the principal and 29.9% towards interest. 

Dozens of lenders including mainstream banks, NBFCs and new-age lending apps are offering personal loans in India. The personal loan amount varies from lender to lender. Generally, you can get a personal loan from Rs. 50,000 up to Rs. 25 lakhs from traditional lenders for a tenor ranging from 12 months to 60 months. Interest rates applicable on a personal loan typically range from 10.50% to 30% p.a. The maximum loan amount you can avail and final interest rates are decided by the lender, depending on your eligibility.   

Considering the loan amount and interest rate, you can compute your monthly outgo, using a personal loan EMI calculator. Accordingly, you can choose a repayment period that allows you to pay back the loan without putting a strain on your pocket. A personal loan EMI calculator gives a clear picture of how much of your total payment is going towards interest and the percentage going towards the principal. You can also use the loan principal and interest calculator, and loan tenure calculator in exceptional circumstances. 

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