# Best Ways to Understand Personal Loan EMI with an Online EMI Calculator

As per a report shared by TransUnion CIBIL, personal loans recorded a 48% year-on-year volume growth in 2020. The same is majorly attributed to the growing inclination towards short-term financing products which includes personal loans and credit cards.

• The personal loan segment recorded a growth of 26.5% in the financial year that ended in March 2020.
• As of August 2020, NBFCs accounted for over 42% market share in terms of volume and around 17% in terms of value.

Factors like income gap, rising expenditure and the willingness to improve living standards are among the major drivers. Above all, the ease of accessing this small ticket loan has encouraged individuals to apply for it.

However, the ease of accessing the loan does not mean that borrowers will always be able to repay the loan value. Often, borrowers overestimate their repayment capability and end up availing of an amount higher than necessary, thereby straining their monthly disposable income. To avoid such a scenario, individuals should consider using a personal loan EMI calculator and determine the amount they can afford to repay each month.

A brief introduction to personal loan EMI loan calculator

It is a financial tool that aids borrowers to determine the monthly instalments and interest amount they will have to pay every month to repay the borrowed sum.

With a personal loan EMI calculator, individuals can determine the monthly instalments by checking out different combinations of the principal amount, repayment tenure and interest rate within a few seconds.

This helps users find the most suitable EMI and tenor combinations and manage personal loan EMI repayment efficiently. Consequently, it helps borrowers understand their monthly repayment obligation better.

Personal loan EMI calculation

Personal loan being a popular small-ticket loan, more individuals are inclined towards personal loans to meet their financial requirements. However, to ensure timely and smooth repayment, most financial institutions suggest finding out the personal loan EMI in advance.

Usually, one can find the monthly instalments with the help of the formula given below –

EMI = [P x R x (1+R) N] / [(1+R) N-1]

Here,

P is the principal or loan amount

R is the monthly interest rate

N is the number of EMIs or repayment tenor

Using this information, one can easily find out the instalment they would be likely to pay if they opt for a personal loan for a given tenor.

Example of personal loan EMI calculation manually

Suppose Mohit decides to take a personal loan of Rs.2 lakh at a 12% interest rate for a tenor of 2 years. To ascertain the EMI, he uses the formula:

EMI = [P x R x (1+R) N] / [(1+R) N-1]

Or,

EMI = [200000 x 12 x (1+12)24] / [(1+12) 24-1]

After a series of computation, Mohit finds out that he would pay an EMI of Rs.9,419 and a total interest amount of Rs.26,064.

However, Mohit found the entire process to be quite:

• Cumbersome
• Prone to manual error
• Time-consuming

He also found it challenging to compute and compare the EMIs of different loan tenor and principal amount combinations. Hence, he decided to use a personal loan calculator to simplify the computation process.

Steps to use a personal loan EMI calculator online

By following these simple steps, Mohit was able to determine and compare the monthly instalment of the different loan value and tenor combinations.

Step 1 – He visits the website of a trusted lender.

Step 2 – Mohit navigates to the 'Personal loan EMI calculator' page.

Step 3 – He inputs values against corresponding fields, like principal amount, interest rate and repayment tenor.

With these, he finds details like total payment, loan EMI and interest amount appear on the screen. This way, Mohit was able to compare the outcome of several combinations until he found an ideal one that matched his repayment capability.

In case a user is not satisfied with the outcome, he/she can approach the lender to negotiate favourable repayment options. In most cases, lenders are open to negotiations with applicants with high CIBIL score and spotless credit repayment history. So, to make the negotiation work in favour of applicants, they should try to improve their creditworthiness and improve personal loan eligibility in general.

Individuals looking for a personal loan at affordable repayment terms and flexible tenor can opt for reliable lending institutions like Bajaj Finserv. Some lenders also provide excellent pre-approved offers on credit products, such as personal loans and credit cards. Check your pre-approved offer today by entering your name and phone number.

Hence, the personal loan EMI calculator helps determine individuals' repayment capability and in turn, ensure improved financial planning. It also proves useful in understanding factors that affect personal loan interest rate. One may even use a personal loan eligibility calculator available online before applying for this credit product and minimise the risk of getting their applications rejected.