Banks permit flexible amount to be borrowed in form of personal loan. The personal loan EMI calculator is used to get an idea of the monthly instalments you will have to pay for the amount that you are planning to borrow. You have to consider the amount of loan, rate of interest, tenure and the EMIs before taking a loan. If you are sure about the first three things, you can efficiently use this tool.
There are 2 particular formulae behind the basic principal of this tool. One is used for calculating monthly interest rate and second is used for calculating the EMI. Following information is about the working of both the formulae:
Calculation of monthly interest rate: The interest rate offered by the financial institutions, is the annual rate. You have to convert this rate into monthly rate. For this, the formula used is: Annual Interest rate/12. For instance, if the rate of interest is 20% annually, then the monthly interest rate can be determined by 20/12 = 1.67 %. That means your monthly interest rate will be 1.67 %.
Calculation of the EMI: This is a bit complicated than the above given calculation. You have to input the data like the loan amount, rate of interest and the tenure. The tenure should be considered in months. The formula used for calculating the EMI is:
E = P x r x (1+r) ^n/ ((1+r) ^n – 1)
E is the EMI amount to be paid,
P is the amount of loan,
r is the rate of interest(monthly),
n is the tenure(in months).
When you input all the required information in the calculator, you will know the EMI amount to be paid for your personal loan.
Do check our personal loan eligibility calculator for knowing your loan eligibility.