Why using EMI Calculator is Important before Applying for Personal Loan

Posted by Megan Rozario on May 10th, 2019

Getting a personal loan these days is not that difficult. With so many personal financing plans available, you have a lot of options to choose fromMinimal documentation and quick approval process just add icing on the cake. 

However, the story doesn’t end here. You still need to make timely repayments in EMIs (equated monthly instalments) to make sure that your credit score doesn’t take a hit. 

A bit of pre-planning always helps and calculating your monthly EMIs beforehand is a huge part of that groundwork. This will help you plan for your monthly expenses meticulously and maintain a healthy debt-to-income ratio.  

What should you do to calculate your EMI amount? Click here.

Though there’s a formula to calculate monthly instalments manually, that demands a lot of time and effort. In order to compute in a hassle-free and accurate manner, it’s best to use an online EMI calculator. Most online calculators are easy to use with a quick turnaround time. All you need to do is enter the loan details, including the loan amount, tenure, interest rate, and processing fee (if any). After that, hit “calculate” to get the final EMI amount. 

You can find such calculators on bank websites and other third-party sites for free. 

Benefits of using an EMI calculator 

There are several benefits of using an EMI calculator. Here are some of them: 

  1. Allows you to compare different loan schemes: In case you have shortlisted a few personal loan schemes, using a calculator will help you understand which plan is giving you the best deal. For that, you have to keep a few factors in mind – the loan amount, tenure, interest rate (as offered by the bank), and processing fee. You can also consider foreclosure or prepayment charges while calculating. Calculate your EMIs for different loan offers in a matter of a few minutes and check which one works for you. 

  1. Helps you choose a better tenure: Before you apply for a loan, make sure that the amount you’re borrowing doesn’t put you in a fix at the time of monthly repayments. To ensure that, you need to play around with the loan amount and tenure to see if your monthly instalments are exceeding 50% of your income (which is not a good sign at all). Using a personal loan EMI calculator makes the job much easier. Depending on the results, you can decide on a specific tenure. Remember that the shorter the tenure is, the higher will be your EMIs. Similarly, you have to pay more as interest for loans with longer tenures.  

  1. Helps you make accurate calculations: Pen- and paper-based calculations can get a bit hectic and time consuming. Also, chances of making an error is quite high in such instances. In comparison, an online calculator will give you accurate results at all times. All you need to do is make sure that you are entering the loan details properly. Any slip there might give you erroneous results. 

  1. Reflects your payment schedules: Other than the monthly instalment amount, most online calculators will also compute your entire payment schedule and will represent the same through an amortisation table. Other than that, if at any point in time, the bank decides to change the interest rate, you can check the revised prepayment schedule through an online calculator.   

  1. Works as a convenient option: Last but not the least, using an online calculator is a more convenient and viable option when compared to pen- and paper-based calculations. You can calculate your monthly instalments in a matter of seconds. 

Things to keep in mind 

Here are certain factors to keep in mind before you apply for a loan: 

  • The results offered on EMI calculators are not absolute. They are meant to give you an idea of what your loan repayments would look like for various tenures. They are not to be taken at face value. 

  • The EMI amount may vary over the course of time depending on your payment behaviour. Suppose, you have made partial prepayments on your loan. In such an instance, the monthly instalment amount will decrease. 

  • For loans with floating interest rates, the rates might change over the period of time. This may affect your EMIs. For fixed-rate loans, there won’t be any changes. 

  • If you are transferring your existing loans to a new loan account, your EMI will change. 

  • Any change in the loan tenure will impact your monthly instalment amount. 

Easy and convenient to use, online calculators are designed to make your job easier when it comes to calculating your monthly EMIs. You can tweak the tenure and amount any number of times to make an informed decision while applying for a loan. 

 

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Megan Rozario

About the Author

Megan Rozario
Joined: May 10th, 2019
Articles Posted: 1