14 SEPTEMBER, 2022

Financial planning assists you to manage your monthly expenditures properly and helps save a substantial amount for a rainy day. However, unforeseen events are difficult to anticipate, which may result in instant requirements for funds. In certain cases, when the fund requirements are massive, you may face fund mismatches. Here is where a personal loan can help you as it allows you to avail funds without any collateral and with zero restriction on end usage.

While a personal loan is available without security or collateral, this does not imply you can apply for it without conducting in-depth research. Before you hit on the ‘personal loan apply’ option, ensure you understand what your Equated Monthly Instalments (EMIs) will look like and for this you can use an online personal loan EMI calculator. Failure to do so might drive you into a situation where you may not be able to meet your monthly repayments on time.

With a personal loan EMI calculator, you can determine your EMI beforehand, which can allow you to plan your repayment strategy better. Read on to know more about how a personal loan EMI calculator can help you.

What is an online personal loan EMI calculator?

It is a calculator available on most personal loan lenders’ websites, which can help compute your monthly EMI, overall repayment amount, and the overall interest component. You just need to input details like the loan amount, personal loan interest rate, and repayment tenure and based on the added details,

 the calculator will display the personal loan EMI and overall interest constituent.

Keep in mind that such online calculators are just indicative tools designed for personal research and calculation. The banks you will approach will decide your loan components like loan amount, interest rate, and repayment tenure based on their assessment of your financial credibility.

How does an online personal loan EMI calculator function?

The calculator functions based on the following formula:

Personal loan EMI = P x r x (1+r) n/((1+r) n-1)

Here P equals loan amount, r equals interest rate and n equals tenure in months. While you can certainly calculate your personal loan EMI manually, the chances of committing errors are more in such cases. With an online personal loan EMI calculator, you can eliminate such manual errors as the calculator computes the results accurately in a snap, which also saves time.

What are the benefits of using an online personal loan EMI calculator?

Here are the major benefits of using a personal loan EMI calculator:

Helps compare different personal loan offers – With EMI calculators, you can instantly compare different available offers on personal loans and make an informed decision. As the personal loan interest rate differs from one lender to another, you can input these numbers into the calculator to derive your monthly repayments for every offer you get. With the calculator, you can instantly figure out which offer is suitable for you.

Allows you to select the correct tenure – With the calculator, you can easily play around with distinct tenures and arrive at the correct one as per your preference and needs. Note that EMI and tenure are inversely related. This means higher tenure equals lower personal loan EMI and vice versa.

Computes overall repayment amount – With the calculator, you also can derive the overall repayment constituent with components that you need to pay off in the form of principal and interest.

Ending note

By using the calculator, you can compute your EMI, overall interest constituent, preferred tenure, etc., which allows you to make an informed decision. Thus, it is recommended to use the calculator, as by using it you can plan your finances better and be away from debt traps, which are often due to uninformed decisions.

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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.