Personal loan EMI calculator: When and how to use it? An explainer | Mint

If you have raised a personal loan and are still struggling to decide the tenure in which you need to repay the loan, then you should use a personal loan EMI calculator. So, what is a personal loan EMI calculator?

It is an online tool that helps you find out the actual instalment that you need to pay if your loan amount, rate of interest and tenure are already decided.

Typically, there are three variables of a personal loan EMI calculator. Let us suppose, you plan to borrow ₹5 lakh over a period of three years and the bank is offering it for 11 percent per annum.

Personal loan EMI calculator: Three variables

I. Interest rate: This refers to the interest which the bank proposes to charge. For instance, when the rate of interest is 11 percent. Then you need to enter 11 percent in the relevant column.

II. Loan tenure: This implies the time duration for which the loan will continue. For instance, when you have taken out a loan for three years, you need to enter 3 years in the relevant column.

III. Amount of loan: Finally, as the name suggests, this means the total amount of loan. For example, in the above illustration – the total amount of loan is ₹5 lakh.

Let us enter these figures in the personal loan EMI calculator which can be accessed here. Upon entering these figures, we will come to know that monthly EMI would turn out to be ₹16,369.

What is the purpose of an EMI calculator?

It is useful to ascertain the monthly instalment that one needs to pay which suits the borrower. For instance, in the above illustration – where the calculator shows the instalment to be ₹16,369 – you can stretch the tenure for the EMI to come down.

If we enter loan tenure as 48 months, the monthly instalment would fall to ₹12,922. Since you wanted your EMI to be lower than ₹15,000, you would perhaps opt for it.

(Note: Raising a loan comes with its own risks. So, due caution is advised)