As per the Reserve Bank of India data, the amount borrowed as personal loans stood at Rs.5.89 lakh crore, which reached a figure of Rs.19.33 lakh crore as of June 2018.
Such growth in the borrowing of personal loans over the decade is as a result of –
- Easy accessibility,
- No need to provide collateral,
- Quick processing,
- Simplified documentation process,
- No end-use restrictions, etc.
While personal loans can help customers avail funds for any of their financial needs, customers can make use of a personal loan EMI calculator and pre-determine their financial liability over the tenor of a loan. It helps borrowers understand and plan their financial obligations throughout the loan tenor.
Input variables of personal loan calculator
Borrowers need to input a few variables in such calculators to calculate loan emi the equated monthly instalments or EMIs that they have to pay once the repayment period for a loan begins.
Following are the input variables that need to be submitted by individuals.
- Tenor – Borrowers need to input their loan tenor as one of the variables to determine loan EMIs. They can also tweak the value for loan tenor and check the variations reflected in the equated monthly instalments to be paid.
It is to note that reduced loan tenor will make the EMIs heftier while long tenor will lessen borrower’s burden as the EMIs to be paid will be less.
For example, individuals applying for a loan amount of Rs.5 lakh for a 24-month tenor at a 12% rate of interest will have to pay EMIs of Rs.24,962. The cost of loan will be Rs.5.64 lakh.
If the loan tenor is extended to 36 months keeping the other variables same, then the equated monthly instalment (EMI) will reduce to Rs.16,607. The cost of loan, in this case, becomes Rs.5.97 lakh.
Hence, while longer tenors lower the EMIs, these also increase the cost of loan. Contrarily, shorter tenors have the opposite impact.
Borrowers will be able to determine and choose the right tenor by using a personal loan EMI calculator.
- Rate of interest – Rate of interest applied on loan depends upon several factors, including tenor and loan EMI. Financial companies may apply a higher rate of interest on long-tenor loans as the repayment period is stretched. Borrowers can tweak the values of tenor to see different EMI options and check the suitable one for them.
- Loan amount – It is another mandatory variable that needs to be submitted for EMI calculation.
Individuals have to input these variables in a personal loan calculator to determine equated monthly instalments (EMIs) for repayment of the loan. This ensures easy planning of finances for an individual as they can estimate the monthly instalments and tweak the values to reach a better loan option.
Further, non-banking financial companies like Bajaj Finserv facilitates borrowers loan application procedure with their pre-approved offers. Such offers are available on multiple financial products such as personal loans, home loans, business loans, along with others. Customers can check their pre-approved offer by submitting their name and contact number.
Borrowers can compare loan opportunities and customise as per their need by altering the values of loan tenor, amount, etc.
How to calculate EMIs?
Loan calculator for personal loans utilises the following formula for calculation of EMIs –
E = P x r x (1+r) ^ n / [(1+r) ^ n-1]
Where,
- E is the EMI.
- P is the loan amount.
- r is the rate of interest calculated monthly.
- n is tenor of the loan (in months).
Financial institutions provide customers with a personal loan calculator so they can compute EMIs hassle-free and better plan their financial obligations in advance. Borrowers will be able to pre-determine the EMIs and be prepared for the upcoming financial situation accompanying the loan. Making use of loan EMI calculator will ensure that customers don’t put themselves in a situation of financial strain.
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