When managing personal loans, one of the most valuable tools at your disposal is the personal loan EMI calculator. This user-friendly online tool provides a clear estimate of your monthly payments based on three key factors – the loan amount, interest rate, and loan tenure. However, its utility goes beyond just calculating monthly payments.
Let’s explore the benefits and strategies for using an EMI calculator to manage your finances more effectively.
Before exploring how to use this tool, let’s first understand the factors that affect your EMI calculation:
Loan Amount: The amount you borrow directly influences your monthly payments. A larger loan naturally leads to higher EMIs.
Interest Rate: The interest rate, set by the lending institution, is a major factor in determining the EMI and the overall cost of the loan. Lower interest rates lead to lower monthly payments and can reduce the total interest paid over the duration of the loan. A strong credit score (typically 750 or above) and a stable income source (such as a steady job in a reputed organisation) can increase your chances of securing loans with lower interest rates.
Loan Tenure: Loan tenure is another critical factor affecting the EMI. A longer tenure results in lower monthly payments but can lead to higher overall interest costs. A shorter tenure means higher EMIs but can reduce the total interest paid over the loan tenure.
Here’s how to use the personal loan EMI calculator offered by SMFG India Credit, a leading Indian NBFC:
Start by entering the total amount of money you plan to borrow.
Next, input the interest rate offered by the lender.
Specify the repayment period, or loan tenure, which typically ranges from 12 months to 60 months.
Once all the details are entered, the EMI calculator will instantly display your monthly EMI amount. This will help you assess whether the loan aligns with your budget and current expenses. You will also be able to see the total amount payable over the loan tenure and the total interest to be paid.
From here, you can easily adjust any of the inputs to explore different repayment scenarios that best suit your financial situation. A good rule of thumb is to ensure that your loan EMI does not exceed 60-70% of your monthly income so as to maintain financial flexibility.
Let’s understand EMI calculation with an example. Suppose you’re considering a loan of INR 7,00,000 at an interest rate of 13% per annum over 5 years. The EMI would be approximately INR 15,927, and the total interest payable over the loan tenure would amount to around INR 2,55,629.
By understanding how different factors affect your loan, you can optimise your repayment plan and potentially lower your interest costs to save money. Here’s how a Personal Loan (PL) EMI calculator can help:
● Scenario Analysis: An EMI calculator allow you to compare different loan offers, helping you find the most cost-effective option by adjusting factors like interest rates and loan tenures.
● Optimising Tenure: With an EMI calculator, you can weigh the impact of different loan tenures on both your monthly EMIs and the total interest paid. Thus, you can find the right balance that fits your financial situation, ensuring you manage your monthly expenses without overpaying in interest.
● Balance Transfers: An EMI calculator can be a useful tool when considering a balance transfer to another lender with a lower interest rate. By evaluating the impact on your monthly EMI and total repayment amount, you can determine if transferring your existing loan to a different lender will reduce your repayment burden and save money in the long run.
● Consider Additional Costs: Most personal loans come with associated fees and charges, such as processing fees, prepayment charges, and late payment penalties. Be sure to factor these into your loan planning to avoid unexpected expenses and ensure a more accurate estimate of your total loan cost.
● Complement Budget Planning: Use the personal loan EMI calculator as part of your broader financial planning. Adjust loan parameters such as loan amount, interest rate, and loan tenure to ensure that the monthly EMI aligns with your existing expenses and future savings goals. This will help you get a clearer picture of EMIs you can comfortably afford.
● Select a Suitable Tenure: A loan with a higher EMI can be repaid quickly, but may strain your finances. Similarly, a loan with a lower EMI can be easy on your monthly budget, but will keep you in debt for a longer period. Use a personal loan EMI calculator to find the most suitable tenure that helps you achieve a balance.
By helping you understand the relationship between loan amount, interest rate, and tenure, a personal loan EMI calculator enables informed decisions and better financial planning. Remember to use this tool alongside careful consideration of your income, existing expenses, and long-term financial goals. Using a personal loan EMI calculator wisely can help you optimise your loan terms and ensure a comfortable repayment experience while maintaining financial stability.
*EMI calculators only tell you an estimated figure. Your actual EMI, interest rate, and other
loan terms will depend on your eligibility and the lender’s policy at the time of the loan application.
Disclaimer: This content is part of a marketing initiative. No TNIE Group journalists were involved in the creation of this content.