Personal loans: If you are planning to raise a personal loan, one of the first things you are supposed to do is to compute your monthly instalment, or equated monthly instalment (EMI). This can be done seamlessly by using a personal loan EMI calculator which is provided by most banks for free.
What is a personal loan EMI calculator?
A personal loan EMI calculator is a free tool offered by banks wherein you can compute your monthly instalment based on different inputs such as total amount of loan, rate of interest and tenure of loan.
How to use an EMI calculator?
To be able to use a personal loan EMI calculator, a user is supposed to enter three key variables. These inputs are loan amount, rate of interest and tenure of loan. Let us understand the significance of each of these inputs one by one.
Loan amount: Total loan amount determines the loan EMI. This means bigger the loan amount, larger the EMI, for obvious reasons. And smaller the loan amount, shorter the EMI.
Rate of interest: Second key input is the rate of interest, which is directly proportional to loan amount. This means lower the interest rate, lower the EMI. And conversely, higher the interest, higher the instalment.
For example, when a loan of ₹5 lakh carries 12 percent interest, the EMI will be bigger than the scenario wherein rate of interest is 11 percent – while other factors being constant.
Tenure of loan: Finally, the last input which a customer needs to enter is the loan tenure. This is inversely proportional to the loan EMI. In other words, smaller the loan tenure, higher the EMI. Conversely, longer the loan tenure, smaller the instalment. For instance, for a loan of ₹5 lakh – with other things being constant – EMI will be large when the tenure is 3 years instead of 4.
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