Prospective applicants should determine their EMI affordability before applying for a personal loan. Such applicants can, therefore, use the personal loan EMI calculator to know the optimal EMI and loan repayment period before making the final loan application. This, in turn, would allow them to plan their loan repayment wisely and make prudent financial decisions.
Here are the main benefits of using online EMI calculators before availing personal loans:
Faster and accurate calculations
Prospective applicants can determine their proposed personal loan’s EMI through manual calculations. However, this involves complex formulas and thus can be time-consuming for many consumers and can also lead to calculation errors. Conversely, using an online calculator to compute your personal loan EMI will give quick and precise results, thus saving your efforts and time.
Estimation of interest costs
Using a personal loan EMI calculator can also help you to calculate the total interest costs of your proposed personal loan. The total interest costs would vary widely depending on various combinations of personal loan interest rates, loan tenure and amount. Note that prospective applicants should additionally use APR calculator to determine their total borrowing cost on an annualised basis. In this case, the total borrowing cost would include the overall interest costs as well as processing fees, documentation charges or other one-time charges incurred while availing the loan.
Determining the optimal loan tenure
Your loan tenure can influence both the EMIs and the interest costs of your personal loan. Longer personal loan tenures lead to lower EMIs but higher overall interest costs. On the other hand, shorter loan tenures increase your loan EMIs, thus allowing you to close your personal loan sooner while bearing lower interest costs. Using a personal loan EMI calculator would allow you to choose your optimum tenure after factoring in your repayment capacity and monthly contributions towards crucial financial goals.
Determination of optimal personal loan EMI
Lenders evaluate your loan repayment capacity using the EMI/NMI ratio. The EMI/NMI Ratio is the percentage of net monthly income that goes into paying your monthly repayment obligations, including the EMI of your proposed personal loan. Loan applicants having EMI/NMI ratio within 50-55% have higher chances of availing personal loans. Applicants exceeding this limit can choose longer repayment tenure and/or reduce the loan amount of their proposed personal loan to reduce their EMIs within the aforementioned limit. Doing so would also give applicants more room to accommodate their planned and unplanned expenses.
Better Financial Planning
Lenders offer personal loans at both fixed and floating interest rates. The EMIs of personal loans availed at fixed rate remains unchanged for the entire tenure, which allows borrowers to plan their loan repayment and manage their finances with higher certainty. While the EMIs of floating interest rate personal loans can change during the loan tenure depending on the changes in their linked external benchmark rates, applicants can still use personal loan EMI calculators to estimate the personal loan EMIs and plan their finances after factoring in increased interest rates.
Borrowers should always factor in the monthly contributions required for investing towards your crucial financial goals. Borrowers sacrificing their monthly contributions for faster repayment of their existing EMIs may have to avail loans at higher interest rates in the future to fulfil those financial goals. To avoid this, applicants should always factor in the monthly contributions towards their financial goals when selecting loan tenure and EMI. They can use the personal loan EMI calculator to determine if they have sufficient monthly surplus, after servicing their personal loan EMIs, for investing towards their unavoidable financial goals.