If you are planning to raise a personal loan, one of the important decisions that you need to make is to decide about the quantum of monthly instalment which is also known as an EMI or equated monthly instalment. Higher the loan EMI, shorter the loan tenure. Conversely, smaller the EMI, longer the loan tenure.
The amount of EMI can be easily computed by using a personal loan calculator which calls for three essential inputs. But before that, let us first understand what exactly a personal loan EMI calculator is.
What is a personal loan EMI calculator?
Those who are not aware, a personal loan EMI calculator is an online tool wherein – as the name suggests – you can calculate the instalment by entering different variables – loan amount, tenure of loan and rate of interest.
Which are the three variables?
Three variables which determine the personal loan instalment are as follows:
A. Rate of interest: First and foremost, personal loan EMI is a function of interest rate. Higher the interest rate, smaller the loan EMI and smaller the interest rate, higher the loan EMI. For instance, loan EMI on a loan which has an interest of 10 percent per annum would be smaller than on a loan which has 12 percent interest.
B. Loan amount: Second variable is the loan amount. This is another pertinent factor which determines the instalment of loan. Loan instalment is directly proportional to the loan amount.
For instance, EMI on a loan of ₹5 lakh would be smaller than that on a ₹10 lakh loan with other factors being the same.
C. Tenure of loan: Finally, the third factor which determines the loan instalment is the loan’s tenure. This is inversely proportional to the loan EMI. In other words when the loan tenure is long, the EMI would be small and when the loan tenure is short, the EMI would be large.
This means, if you intend to keep your loan EMI small – you may opt for a long tenure of loan repayment.
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