How to calculate EMIs for a Personal Loan

Use our online EMI calculator to evaluate monthly instalments for your personal loan.
How to calculate EMIs for a Personal Loan
5 min read
7 February 2024

Personal loans serve as a versatile financial tool, offering individuals the flexibility to meet various needs, from planned expenses like home renovation to funding unforeseen expenses. When considering a personal loan, understanding the concept of EMIs is crucial. Full form of EMI is equated monthly instalments, it is a fixed monthly payment that usually includes both the principal amount and interest, ensuring systematic loan repayment. Calculating personal loan EMIs is a key step in financial planning, providing borrowers with insights into their monthly obligations.

Factors affecting personal loan EMIs

There are several factors that affect the amount of your personal loan EMIs. Understanding these factors helps you to make an informed decision.

  • Loan amount: One of the most important factors is the loan amount you borrow. Higher loan amounts lead to larger EMIs.
  • Interest rate: Another important factor is the interest rate. Lower rates result in reduced EMIs.
  • Loan tenure: Longer tenures decrease monthly payments but increase overall interest.
  • Credit score: Higher credit scores may secure lower interest rates and favourable terms.
  • Monthly income: Higher monthly income helps you to negotiate more favourable interest rates which eventually result in lower EMIs.
  • Debt-to-Income Ratio: Lower ratios may lead to more favourable EMI terms.

How to calculate personal loan EMIs

Your personal loan EMI is a fixed amount that gets deducted from your registered bank account. Calculating EMIs for a personal loan is a straightforward process that involves three key components: the loan amount, the interest rate, and the loan tenure.

The formula for EMI calculation is:

EMI = [P x R x (1+R)^N] / [(1+R)^N-1]

Where

EMI: Equated monthly instalments

P: Principal loan amount

R: Monthly interest rate (annual interest rate divided by 12)
N: Number of monthly instalments (loan tenure in months)

Understanding how the personal loan EMI calculator works

While the manual calculation of EMIs can be tedious and time-consuming, technology has come to the rescue with online EMI calculators. You can use a personal loan EMI calculator and get instant results. This online calculator works on the above-mentioned formula but eliminates lengthy manual calculations. You can use this user-friendly EMI calculator by simply entering the loan amount, interest rate, and tenure. These calculators quickly generate accurate EMI values, saving you from complex mathematical computations.

How to calculate your personal loan EMI using an online calculator

Calculating EMIs using a personal loan EMI calculator is easy and hassle-free. You can follow these simple steps to know the EMI amount of your personal loan.

  1. Visit the personal loan EMI calculator on our website.
  2. Enter the loan amount that you intend to borrow.
  3. Input the applicable interest rate.
  4. Select the loan tenure (in months) from the range of 6 months to96 months,.
  5. Your EMI, along with the total interest and total amount payable will be displayed.

Calculating EMIs in advance offers several benefits. Firstly, it aids in effective financial planning by allowing individuals to assess the affordability of monthly repayments, preventing potential financial strain. Secondly, it contributes to creating a comprehensive budget, enabling the efficient allocation of income while meeting loan commitments without compromising other essential expenses. Additionally, this EMI calculation supports informed decision-making by facilitating the comparison of loan offers from various lenders. By evaluating factors such as EMIs, interest rates, and tenures, borrowers can select the most suitable loan option aligned with their specific financial goals.

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