A Personal Loan can offer you financial aid when you’re in immediate need of cash. You can apply for Personal Loan to finance your child’s education or to pay for your vacation expenses. On the other hand, car loans, Home Loans, and Business Loans can be utilised for specific purposes only.
Having said that, irrespective of which loan you’ve taken, a loan calculator can make things easy for you. A loan calculator will help you calculate EMI amounts so that you’re aware of how much you need to pay every month to clear your debt.
Let’s take a look at the different types of loan calculators available online, their computation method, and benefits.
Types of Loan Calculators
The basic formula used by all banks and NBFCs to calculate EMI is:
EMI = P x r x(1+r)^n/ ((1+r)^n-1)
Here, P = principal amount
r = rate of interest
n = no. of months making your tenure
There are different types of loan calculators but generally, all of them make use of this formula to give you an EMI estimate. Depending on the type of loan you’re taking, here are some loan calculators you can use:
- Personal Loan EMI calculator
- Home Loan EMI calculator
- Business Loan EMI calculator
- Car Loan EMI calculator
- Doctor Loan Calculator
Benefits of Loan Calculators
Loan calculators are easily available online and they’ve been designed to calculate the EMI amount you’ll be liable to pay every month. Depending on the loan amount you’ve applied for, the rate of interest, and the tenure, a loan calculator will give you an approximate EMI estimate. For example, if you have applied for a Personal Loan, you can use a Personal Loan interest calculator to understand how much money you’ve to shell out every month.
You just need to fill in a few details in order to know the EMI amount or the total interest payable on your loan. The 3 key details that you’re required to provide are your principal loan amount, the rate of interest, and loan tenure. The computation method is usually the same across all banks and NBFCs. The best thing about using a loan calculator is that you don’t have to visit a financial institution to get your EMI estimate instead, you can know all about it right from your home.
By knowing the EMI amount, you’ll understand whether you can afford the loan or not. All banks and NBFCs have their own online loan calculators and you can use them to compare results. If the EMI of one lending institution seems unaffordable, you can check out the others. This will help you save some money as you can opt for the bank or NBFC that demands the lowest EMI per month.
For example, let’s assume, you’ve taken a loan of Rs.1 lakh at 10% for a tenure of 20 months. You will have to pay an EMI of Rs.5,449 and the total interest payable will be Rs.8,980. But, if the tenure is extended to 30 months, the total interest payable will be Rs.13,434 and the EMI amount will drop to Rs.3,781. If you’re keen on paying a lesser EMI, then you can opt for a longer tenure and vice versa.
All such decisions will become easy when you have a loan calculator.
Help Plan Finances
By knowing the exact amount you need to pay, it’ll become easier for you to fit this expense in your monthly budget. You can also plan your yearly finances and set long-term financial goals. Loan calculators will help you get a clear understanding of the loan amortization table. By looking at the table, you can easily understand how the payments are being made, the amount of loan that has been repaid, and the outstanding balance.
Loan Eligibility Calculator
Apart from these EMI loan calculators, there’s also a loan eligibility calculator and this varies from one lending institution to the other. It tells you whether you’re eligible to apply for a loan in a particular bank or NBFC.
The eligibility criteria depends on your gross income, expenses, and outstanding debts. Once you punch in these details, the calculator will show you the loan amount you’re eligible for taking and the EMI amount you’ll be liable to pay.
A loan eligibility and a loan EMI calculator can prepare you financially even before you sign up for a debt. By knowing your EMI amounts in advance, you can rethink your budget and make way for the monthly instalments.