Personal loans are considered one of the fastest-growing forms of consumer financing. However, the sector witnessed a rise in loan defaults due to the economic slowdown in 2020.
To provide a better borrowing experience during such difficult times, financial institutions are focusing more on bringing transparency to the system. Most of them have kept tools like an online personal loan interest calculator available on their websites to meet that purpose. It can help individuals to estimate the EMIs, including the interest outgo. And, based on these calculations, they can make prudent borrowing decisions and avoid repayment defaults.
How to use a personal loan interest calculator?
You can follow the below-mentioned steps to evaluate your monthly installments:
Step 1: Visit the online portal of your preferred lender and select the EMI calculator option from the drop-down menu.
Step 2: Enter the loan amount and the repayment tenor, and submit the offered rate of interest as well.
Step 3: Click on ‘Calculate’ to get instant results.
Besides knowing how to use a personal loan EMI calculator, one should also understand how using this device can benefit their cause.
Benefits of personal loan interest calculator
Due to the ‘no end-use restrictions’ feature and no collateral requirements, a personal loan has always been one of the most sought-after credit facilities.
Therefore, if you are availing of such emergency loans to meet any urgent financial requirement, you can use an EMI calculator to plan your repayment strategy better. Here is a list of advantages you can get with this financial tool:
- Comparing interest rates
Interest rates generally vary across different lenders, depending on your credit profile. For example, a person with a credit score of 800 is more likely to be offered an affordable interest rate than an individual with a CIBIL score of 500. Considering how the CIBIL score is important for your personal lending, look out for factors that can hamper your credit profile and take necessary actions from time to time.
Remember to choose the combination of loan amount and repayment tenor wisely since the interest rates vary depending on that as well. Most of the lenders mention these rates on their official portals. Hence, it becomes easier to evaluate your EMIs using a personal loan interest calculator.
- Provide accurate results
Calculating monthly installments manually can be a tedious task, and inaccuracy here can hamper the entire repayment strategy. The formula used to calculate personal loan EMIs is:
- EMI= P × r × (1 + r)n/((1 + r)n – 1)
Here, P stands for the principal amount, r signifies the interest rate, and n stands for your chosen repayment tenor.
To get error-free results, it is advisable to rely on such online financial tools where you just need to submit these inputs to evaluate the monthly installments.
- Better financial planning
The advent of technological advancements has made things easier for borrowers to access all the necessary information online and plan their finances accordingly. As mentioned earlier, such financial tools are available online and require only a few seconds to provide the exact result.
Therefore, to plan your personal loan EMI repayment better and avoid missed or delayed payments, these online tools can be of great help. Hence, financial planning has become easier than ever, with EMIs meeting one’s repayment capabilities.
- Access to a loan amortization schedule
One of the salient features of these online calculators is that they offer access to a loan amortization schedule. With this sheet, one can get a detailed break-up of your loan repayment. Borrowers can check how their monthly installment payments are progressing, and the portion of interest, and the principal amount they are paying each month.
It also aids them to opt for the right personal loan tenor that works for them.
- Work on factors affecting the EMI
When it comes to personal loan EMIs, both the repayment tenor and the interest rate have a significant role. Even though opting for a lengthy tenor seems like an ideal way to make the monthly installments affordable, it imposes an additional burden of interest.
On the other hand, going for a shorter tenor helps you get rid of the loan burden quickly. Additionally, it lowers the total interest outgo.
Leading financial institutions like Bajaj Finserv allow their customers to access this financial tool without bearing any cost. Hence, individuals can apply for a loan application as per their suitability, which reduces the chances of rejection.
Additionally, the availability of pre-approved offers can also aid individuals to know about their loan offer in advance. It also streamlines the loan application process and saves time. Such offers are available on multiple financial products, like personal loans, business loans, credit cards, etc. To check their pre-approved offer, debtors can provide their names and contact details.
A personal loan interest calculator can also be used to get an estimation of part payment of foreclosure. Thus, using this online device, borrowers can find a loan offer that perfectly fits their requirements. No matter how much individuals manage to save for such purposes, the expenses can increase when they opt for any comprehensive upgrades. Therefore, instead of draining their savings, it is better to avail of a home renovation loan. And, while they are at it, make sure to research on best renovating ideas to boost their home’s value.
