An interest rate calculator determines the real rate of interest on loans with a fixed term and monthly payments. Interest rate is the amount charged by the lenders to borrowers for the use of money, expressed as a certain percentage of the principal or borrowed amount; it can also be described alternatively as the cost to borrow money. The interest rate directly affects total interest paid on any loan. Interest rates are involved in almost all lending and borrowing transactions. For examples, applications of the interest rates include mortgage rates, the charge on a person outstanding debt on a credit card, personal loans to fund capital projects, the growth of retirement funds, amortization of long-term assets, the discount offered by a supplier to a buyer for paying off an invoice earlier, and much, much more. It represents the time value of money. The interest rate is calculated as a percentage of the money borrowed and it is usually charged annually.
This is the amount the applicant wants to borrow from the lender. The entire interest amount to be charged is calculated from this loan amount. The higher is this amount, the more will be the interest levied on the borrower and the more will be his EMI amount every month. The borrower needs to enter his preferred loan amount into the personal loan EMI calculator, in the appropriate space provided for the same.
If you go to the lender for knowing about the interest rate, they will first enquire about your CIBIL and then tell you the same. And too many hard inquiries will have adverse accept on the credit score. But with the use of interest rate calculator, you can know the interest rate without comprising on CIBIL score.
An interest rate calculator plays a significant role in deciding the loan amount and the correct lending institution for borrowing the loan. When the user fills-in the calculator form, it displays the rate of interest; which helps in predicting and planning the finance for a longer period.
All the values in the interest rate calculator are customizable, you can alter the values till you get the desired and best result. Therefore, it will help you in availing the perfect loan amount for you with the best possible values.
The Loan amount/ Principal amount is the major component of a loan. When a borrower pays the EMI, they are paying a part of the due interest on the outstanding loan amount, while the remainder goes for the paying off the outstanding loan amount. Therefore, the principal amount is the amount of money that a borrower has borrowed from the lender less whatever the borrower has already repaid. Whereas, the interest is the amount of money the lender charges on top of the principal amount, and is calculated based on the rate of interest and the amount of the principal.
EMI stands for Equated Monthly Installment. It is a sum that a loan borrower is liable to pay every month in the subject to repay the loan. The EMI amount is calculated in such a way that the loan interest is higher during the initial months and gradually reduces with each payment. There are three major factors used in loan EMI calculation:
The loan term or duration, is also commonly referred to as “repayment tenure” is the period for which a loan is sanctioned. The borrowers are supposed to pay the principal sum and the total interest within the sanctioned period.
This is the base amount that is borrowed by the customer as a loan. It may differ from lender to lender based on their evaluation of the customer’s profile.
The interest rate is the percentage levied on the principal amount. This may vary based on the lender to lender.
Loan tenure is the time chosen by the borrower for the repayment of the loan amount. Generally, the loan tenure varies based on the type of loan is availed. Almost every bank offers a flexible repayment loan tenure which implies that the borrower has the power to choose the repayment tenure which best suits his/her needs.
Ans) An interest rate calculator is very easy and simple to use. All you need to do is enter the required information like the loan amount, loan repayment tenure (in months), and EMI. The calculator will use the information provided by you and show you the interest rate you will have to pay every month.
Ans) The parameters on which the interest rate charged may vary based on many things like the type of loan, lenders, and others. But the major factors that determine the interest rate are given here:
The income of an individual majorly affects loan interest rates. Generally, a high-salaried individual is at a safer bet while availing of a loan. As the chances of timely repaying the loan amount are higher in the case of high salaried people.
The repayment history plays a significant role in determining the loan rate of interest. Typically, it serves as a validation of the past financial records of loans and credit cards. When an individual makes a payment on the previous loan, additional points are added upon the current score.
The credibility of an organization ensures a good deal of loans. When an individual works for a reputed company, he/she is more considerate towards the timely EMI payments.
An individual employment nature also determines the loan rate of interest. Generally, a great difference has been seen between the offered interest rates to a salaried employee and a self-employed entrepreneur.
Another important factor that affects the loan interest rate is the relationship with the loan lender. If the borrower been an existing loyal customer with a good repayment record, the loan lender might grant some extra perks and offers.
Ans) CIBIL is an acronym for the Credit Information Bureau (India) Limited. It is India’s first credit information bureau. It acts as a database of the credit history of an applicant. CIBIL provides this information to the lenders in the form of credit information reports (CIR). And yes, it majorly impacts the interest rate which ultimately affects the monthly EMI. If an applicant has a good CIBIL score then his chances of loan approval at a low rate of interest increase.
Ans) Generally, the loan amount depends on the income and varies based on whether you are salaried or self-employed. Usually, the lenders restrict the loan amount such that the EMI does not exceed the 40% - 50% of an applicant’s monthly income.
Ans) The default rate is the interest rate per annum that applies to the overdue of payments.
Ans) Loan tenure depends on the type of loan you avail for example if you go for a home loan that the tenure can go up to 30 years whereas if you go for a personal loan typically the maximum loan duration of 5 years.
Ans) There are different factors on which the rate of interest depends. And to get the loan at a low-interest rate you need to be a focus on few things like your credit score, repayment history, compare the interest rate before applying, look out for seasonal offers, employment history, the credibility of the employer, and others.