Whenever people opt for loans, they pay it all at once or in instalments, also known as Equated Monthly Installments, as per their loan requirement and loan duration. It is vital to calculate the amount carefully and ensure there are no delays in the payment. Paying late EMIs is penalised, and nobody would want to risk it. However, EMIs make payment facilities organised and structured in a manner where the loan borrower can meet daily essentials without feeling financially helpless.
A simple definition of a personal loan EMI calculator is that it is a tool where loan borrowers enter the amount to borrow, the loan duration, the rate of interest and the processing fee. The calculator will calculate the estimate loan amount along with the amount required for the EMI monthly. Accordingly, the borrower will set a budget to create a balance between the income and the expense.
The device uses a simple formula to derive the loan amount: E = P x r x (1 + r) ^ n / ((1 + r) ^ n – 1).
Given below is the explanation of the formula:
E – It is the EMI amount that the borrower will pay every month
P – It is the amount that the individual will borrow
r – It is the rate of interest calculated monthly
n – It is the duration of the loan calculated in months
Given below are three reasons why loan calculation is essential:
A simple definition of a personal loan EMI calculator is that it is a tool where loan borrowers enter the amount to borrow, the loan duration, the rate of interest and the processing fee. The calculator will calculate the estimate loan amount along with the amount required for the EMI monthly. Accordingly, the borrower will set a budget to create a balance between the income and the expense.
The device uses a simple formula to derive the loan amount: E = P x r x (1 + r) ^ n / ((1 + r) ^ n – 1).
Given below is the explanation of the formula:
E – It is the EMI amount that the borrower will pay every month
P – It is the amount that the individual will borrow
r – It is the rate of interest calculated monthly
n – It is the duration of the loan calculated in months
Given below are three reasons why loan calculation is essential:
- Loan amount: It is advisable to borrow loans of amounts that one can pay quickly. People choose appropriate loan amounts depending on the loan EMI calculation so that repayment becomes less of a hassle. By maintaining a low ratio between debt and income, people can avoid defaulting on loan repayment.
- Loan tenure: Shorter loan tenures mean higher EMI payments and lower interest rates. In contrast, longer loan tenures mean lower EMI payments and higher rates of interest. Calculate EMIs for different types of loans using a personal loan calculator designed especially for estimating EMI payments and suitable loan tenures.
- Loan EMI: Loan borrowers with high debt-to-income ratios are at a higher chance of defaulting on the loan. Defaulting on secured loans, like car loans, force banks to repossess the vehicle and put it up for auction, to compensate the loan amount and other dues. Hence, loan amounts should not exceed more than 50 per cent of the borrower’s income.
