Prospective personal loan borrowers can use the online personal loan EMI calculator to calculate their total interest cost and EMI affordability based on their chosen loan tenures. All they need to do is enter the loan amount, interest rate and tenure to calculate the EMIs and interest cost payable throughout the loan tenure. Here, we shall discuss the importance of using personal loan EMI calculators before applying for a personal loan.
Know the actual EMIs
The personal loan EMI can be calculated manually using the mathematical formula [EMI=P*R*(1+R)^N]/[(1+R)^N-1], where P= Principal amount, R= Rate of interest and N= Tenure (in months). However, such manual calculations are usually time consuming and can be error prone. It can take hours if the calculation had to be done repeatedly for different set of values. Hence, to avoid such error prone calculations, it is important to use a personal loan EMI calculator. An online personal loan EMI calculator helps with complex mathematical calculations and provides accurate results.
To check EMI affordability
Lenders usually prefer personal loan applicants whose monthly loan repayment obligations, including the existing EMIs and EMIs of the proposed personal loans, do not exceed 50-55% of their monthly income. Applicants can use the EMI calculator to ensure that their proposed EMIs and existing EMIs remain within this limit. In case the total EMI/NMI ratio increases this limit, applicants should opt for longer tenure or a lesser loan amount to maintain the overall EMI within the given range.
To Determine the Optimum Loan Tenure
Loan tenure influences the personal loan EMI and total interest cost of the borrower. While opting for longer tenures reduce the EMI of the borrowers, it also increases their interest cost. Lower EMIs increases their EMI affordability, which allows them to manage their planned and unplanned expenses apart from investing for their crucial financial goals. On the other hand, shorter loan tenure leads to higher EMIs and reduced interest cost. Borrowers can calculate the personal loan EMIs using personal loan EMI calculator and determine the optimum tenure for their personal loan.
To Plan for Crucial Financial Goals
The EMI of personal loans offered at floating rates keep fluctuating throughout the loan tenure depending on the changes in their linked external benchmark rates. On the other hand, the EMIs for fixed rate personal loans remain constant throughout the loan period wherein the prospective borrowers can plan their crucial financial goals with higher certainty. Applicants opting for floating rate personal loans can use the personal loan EMI calculator to calculate their proposed EMIs while creating a provision for changes in personal loan interest rates.
Note that while planning for their personal loan EMIs, borrowers should try to have adequate surpluses to make monthly contributions towards their crucial financial goals. Failing to do this might leave them with inadequate corpuses for those goals, which might force them to avail costlier loans in future to meet those financial goals. Using a personal loan EMI calculator would allow borrowers to know whether they would have adequate surpluses post EMI payments for contributing towards unavoidable important financial goals.
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