Loans are an important part of our lives and we can avail them for different purposes. The crucial elements of a loan remain the same- amount, tenure, and interest rate. A loan is an agreement between two parties and under this agreement, you need to agree to repay the money with interest. You can apply for a personal loan or a business loan and repay it over the tenure in Equated Monthly Instalment (EMI). All loans are to be repaid in EMI over the tenure. The biggest advantage of repaying in EMI is that you can adjust the amount as per your monthly income and not worry about adjusting the budget. You do not need to make an upfront payment or worry about getting access to a large amount of funds for the loan repayment, thus, reducing the financial pressure. The easiest way to determine the EMI is through a loan EMI calculator.
What is a loan EMI calculator?
An EMI is a payment you make each month for the repayment of the loan and it consists of the principal amount and interest. The EMI amount will be based on different factors and you can use the EMI calculator to estimate the monthly payouts. To use the calculator, you need to provide the information of variables like the principal amount, interest rate and tenure. You will get the result in an instant. It only takes a few minutes to calculate the EMI online. You can head to the website of the lender and use their calculator for immediate results. It is free and user-friendly, plus, you can calculate the EMI as many times as you want to.
Through the loan EMI calculator, you can identify the loan repayment requirement and adjust the monthly budget accordingly. It also allows you to decide the amount you are comfortable paying off each month and the duration for which you wish to make the payments based on your income. If there is a floating interest rate, the EMI will vary but for fixed interest, it remains the same throughout the tenure.
How to calculate loan EMIs?
It is not easy to calculate loan EMI manually. You need three main components of the loan- tenure, loan amount and interest rate. The EMI applicable on the loan will vary according to these parameters. The below-mentioned formula can help calculate the EMI.
EMI = [P x R x (1+R)^N]/[(1+R)^ (N-1)], where,
P is the principal amount,
R is the rate of interest, and,
N is the tenure.
The calculator uses the same formula to provide you with an answer within seconds. If you try to calculate it manually or using a spreadsheet, there could be chances of an error or mistake and it will have an impact on your borrowing decision. The EMI calculator has a universal formula and you can apply it for all types of loans. The variation will only occur when there is a change in one of the variables. The payment will be directly proportional to the amount of money you borrow. Hence, the higher the loan amount and higher the interest, the higher will be your EMI. It is inversely proportional to the tenure, so, as the interest amount paid rises with longer tenure, the EMI payments will decline.
Benefits of EMI calculator
A major benefit of using a loan EMI calculator is that you get to know the amount of money you need to pay towards the loan amount every month so that you do not end up in financial stress at a later stage. It will help you decide on the amount you can manage over the tenure of the loan. The additional benefits are as follows:
You can easily access the calculator at any time and use it any number of times as per your convenience. There is no need to involve an agent or visit the branch for more details on EMI.
If you try to calculate manually or through a spreadsheet, there is a risk of making mistakes. Further, if you change one variable, you will have to make the calculation all over again and it could lead to more mistakes and errors. But if you use the calculator offered by the lender, you will see a reduction in the chances of errors. The results will be highly accurate and will give you error-free calculations within seconds.
Helps with financial planning
Using the EMI calculator, you can make the right borrowing decision. You will be able to plan the finances well and decide if the loan is ideal for you. It also allows you to compare different loan products and then make the right decision.
Save time and effort
The best way to compare different lenders and loan products is by comparing the EMI payable. But if you try to calculate it manually, it will take a lot of time and effort. Plus, you will have to use the formula again and again. However, with the right online tool, you have the benefit to save your time and complete lengthy calculations within a few seconds. You can try different combinations, change the amount or use a different tenure to find the optimal amount.
It can be exhausting to calculate the EMI manually but it is an important part of the borrowing process. You must never sign on the loan documents without calculating the EMI and you can save your time and effort by using the loan EMI calculator. It offers a hassle-free and quick calculating experience. No matter the type of loan you are applying for, use the calculator to get an estimate and then proceed with the loan application. You will be in a better position to negotiate the terms of the loan and will also enjoy easy repayment of the loan. There will be no financial burden if you are well-prepared for the EMI payments.