If you don’t know how to calculate EMI for a personal loan, you can easily do it using a personal loan EMI calculator. You need to know your loan amount, interest rate and the tenure of the loan. If you know these three, you can calculate your EMI in a fraction of a second.
However, except these three, there are some other variables as well that play a role in EMI calculation.
- Your work profile – salaried or self-employed
- The company you work with
- Your credit history
- EMIs of other loans
But, before moving any further, let’s understand the EMI and EMI calculator in detail.
What is a Personal Loan EMI Calculator?
The personal loan EMI calculator is a tool used for calculating the monthly instalments to be paid to undertake your loan. You can calculate your EMIs by just entering a few details in the EMI calculator.
How does it Work?
A personal loan EMI calculator works on two basic formulae.
The first one is for calculating the monthly interest rate, whereas the second one is used to calculate the EMI.
Let’s understand how this works:
1. For Calculating the Monthly Interest Rate
When applying for a personal loan, the interest rate is the first and foremost thing that you should check. For that, you’ll need an EMI calculator. Before you use the EMI calculator, you’ll have to convert your annual interest rate into the monthly interest rate. And, to convert that, another formula is used:
r=annual interest rate/12
For example- If a bank offers you 12% of interest rate annually, your monthly interest rate will be:
12/12=1
Thus, 1% will be your monthly interest rate for a personal loan.
For Calculating EMI
Calculating EMI is a little difficult as compared to monthly interest rate calculation. To calculate your EMI, you’ll need to use the given formula:
E = P . r. (1+r)^n/((1+r)^n – 1)
where,
E=EMI
P=Principal Amount of loan
r=Monthly Interest Rate
n= Loan Tenure
An EMI calculator helps us in various ways. As compared to manual calculation, an EMI calculator helps us in the following directions:
Accuracy
With the help of an EMI calculator, you can get accurate data or information for your business. Without this useful tool, there might be a possibility of making mistakes.
Easy Comparison
EMI calculator allows you to have an easy comparison in a short time. Yes, you can compare different lenders simultaneously, and know about different EMIs offered by them.
Adjustable
The best thing about EMI calculator is the fact that you can use it countless times till you are not satisfied with the result; you can enter the details in the calculator any number of times. You can also re-adjust the settings and can get the results.
Now, as you know how EMI for a personal loan is better than manual calculations, by all means, there’s no need to call the bank, over and over again, to understand how EMIs work.
