If you are planning to take a personal loan and are still unsure about the optimal term and EMI to opt for, it is advisable to play around with the personal loan EMI calculator.
It is an easy-to-use tool that shows exactly what amount you need to pay monthly to repay the loan on time. However, it is crucial to note that you need three determinants to calculate the exact EMI. These determining factors are the loan amount, the interest rate and the term of the loan.
When you enter all three factors, you can find out the exact EMI of the loan. Let us understand this with the help of an illustration.
Using EMI Calculator
Suppose you are planning a ₹A loan of Rs 10 lakh offered at an interest rate of 11 percent. Now, the loan EMI you want to pay depends on the tenure you choose. For example, if the tenure is 24 months, so will your EMI ₹46,607.
And if you cannot afford to pay this EMI, you can decide to spread the loan repayment over a longer term. Over a period of 36 months, the EMI will be ₹32,738.
And if you decide to repay the loan within 48 months, the EMI will turn out to be ₹25,845. And if you decide to repay the loan within 60 months, the EMI will remain ₹21,742 (as the image above shows).
Amount and interest
Another noteworthy point is that the EMI calculator will display a different EMI figure based on the loan amount and interest rate.
For example, if you want to pay an EMI lower than ₹20,000 in the above case and you cannot go beyond the 5 year repayment period. The only option you have left is to reduce the loan amount.
Now, while reducing the loan amount to ₹9.5 lakh, the EMI figure would fall further ₹20,655. And if you drop it further ₹9.25 lakh, it will come down to ₹20,111.
Alternatively, you can look for a loan at a lower interest rate to reduce the EMI amount. When the interest rate is reduced to 10.75 percent for a ₹10 lakh loan, the EMI would further decline for five years ₹19,996.
In summary, a personal loan applicant can use an EMI calculator to determine the optimal loan tenure and choose the right lender who will offer the loan at an affordable interest rate.
