Know How to Calculate Personal Loan Monthly EMI in Just a Few Steps. Read this
While applying for a personal loan, individuals should be careful about determining the EMIs beforehand. To do so, they can use a personal loan EMI calculator to assess the EMIs and take an informed and responsible financial decision. It is a widely available financial tool provided by several financial institutions via the internet.
These EMI calculators have sliders through which borrowers can adjust the loan amount, interest rate, and tenor. After submitting these variables, the calculator shows the monthly installments. Individuals can change the variables and check different EMI options as per their repayment capacity.
The formula used in EMI calculators
Personal loan EMI calculators use the following mathematical formula -
[P x R x (1+R) ^ N] / [(1+R) ^ (N-1)]
Here,
P= Principal or the borrowed loan amount
R= Interest rate charged on the advance
N= Repayment tenor in months
For example, an individual avails a personal loan of Rs.10 lakh at a 12% rate of interest annually for 4 years. Therefore,
P= Rs.10 lakh.
R= 12% yearly, so the monthly interest rate is 1%.
N= 4 years or 48 months.
Now, as per the mathematical formula, the EMI will be -
[10,00,000 x 1/100 x (1+ 1/100) ^ 48] / [(1+1/100) ^ (48-1)]
EMI= Rs.26,334.
Individuals can simply use a personal loan calculator online to calculate their monthly payments quickly and without any error.
PMT formula
Individuals can also use an excel spreadsheet as a personal loan calculator. The formula used in excel to calculate EMIs is known as PMT.
The EMI formula -
fx = PMT (rate,nper,pv)
Here, the variables are following -
Pv– Present value or advance amount or the principal.
Rate– Monthly interest rate (should not be in percentage).
Nper– Total number of payments to be made.
How to avail a low-interest personal loan?
The notable aspect is the rate of interest plays a crucial role to determine EMIs. A higher interest rate accumulates a larger outstanding that increases the amount of EMI.
Even though financial institutions pre-fix the interest rate on a personal loan, borrowers with a higher CIBIL score can negotiate the applicable rate of interest with lenders and reduce it to some extent. Similarly, borrowers with a lower credit rating may need to avail loan facility at a higher interest rate.
The CIBIL score ranges between 300 and 900 and the desirable credit score for a personal loan is 750 in India. Hence, individuals should always keep a credit score of more than 750 to avail financial assistance in emergencies.
Here are some tips to increase the CIBIL score -
Pay the dues on time
The repayment record is the most important factor while evaluating one’s credit score. Thus, individuals should repay all credit card bills and loan EMI timely.
Keep the credit utilization ratio low
The credit utilization ratio depends on borrowers’ expenses on the given credit limit of a credit card. Individuals should keep this ratio below 30% as it implies responsible behavior while using credit.
Maintain a balanced credit mix
Availing several unsecured loans can increase the loan repayment risk. Therefore, it is preferable to balance the credit mix with both secured and unsecured loans.
Do not surrender old cards
The evaluation of credit behavior and responsibility becomes easy with a longer credit record. So, individuals should prefer to upgrade their current credit card rather than apply for a new one.
With an improved credit score, the loan approval process becomes easy and hassle-free. Furthermore, NBFCs like Bajaj Finserv bring pre-approved offers to reduce the time taken to avail financing. These offers are also available with different financial products like business loans, personal loans, etc. By submitting their name and contact number, applicants can check their pre-approved offers.
To conclude, borrowers can find their EMI by using a personal loan calculator to manage their finances accordingly. Moreover, they can avail the most out of personal lending by using this calculator.
Must Read: Pros And Cons Of Instant Personal Loan
BREAKING NEWS: Crown Equity Holdings, Inc. Announces Partnership
