One of the often asked questions by the customers who are going to opt for a personal loan is what is the repayment method that they will have to choose? Well, as you know a personal loan is one of the most popular choices among customers because of the ease and convenience with which customers can get the required money. But one of the most important aspects of a personal loan is repayment which can be done by Equated Monthly Installments (EMIs). To calculate this amount, customers use Personal Loan EMI Calculator.
You must be thinking what exactly is this EMI all about? Well, the EMI amount is a monthly installment that consists of a portion of both principal and interest amount. A customer who has taken a personal loan needs to pay a fixed amount every month towards repayment of the loan for the overall tenure (maximum of 5 years). Any individual who wants to opt for a personal loan wants to have an early estimate about the EMI amount so that he or she can manage finances and that’s where a personal loan EMI calculator comes into the picture.
Thinking about how to use this amazing tool? Well, you don’t need to. We will be telling you about everything related to this and also about the importance of personal loan interest rates in this article. So, keep reading.
Details needed to function Personal Loan EMI Calculator
So, first thing first., since a Personal Loan EMI Calculator is a tool, you will need a set of inputs to attain the output. Well, there are a few basic things that you need to feed into it. These details are Required Loan Amount, Personal Loan Interest Rates, and Tenure. As soon as you feed these details into the calculator, you will get the required output instantly. Apart from the EMI Amount, you can also get Interest Outgo and Total Amount payable.
The best thing about this tool is its endless flexibility. What we mean by this is customers can put as many inputs as they want until they get satisfactory results. The process is so easy that anyone can use this amazing tool.
Now, let’s come onto the part about the importance of Personal Loan Interest Rates in the EMI Calculation. Since personal loans are unsecured loans and lenders don’t ask for any kind of security or collateral against the loan amount, the interest rates tend to be higher than other loans (Home Loans, Gold Loan, Car Loan, etc. ). Personal Loan interest rates tend to change from one lender to another and depend on a lot of factors such as Monthly Income, Residing City, Age, Existing Obligations, Employment Type, and most importantly, Credit Score. The higher the credit score, the lower the interest rates an individual can get as it determines the creditworthiness of an individual.
When we talk about the impact of personal loan interest rates, you should know that it directly affects the EMI amount. The higher the rates, the higher will be the EMI amount and vice versa. Apart from this, the interest amount will also be higher. Let’s make you understand with an example. Here, we are considering an individual who wants to opt for a 4-year personal loan of INR 5 lakh. We are taking two different personal loan interest rates of 11% per annum and 15.99% per annum.
On taking the interest rate of 11% per annum, the EMI amount would be INR 12,923 and the interest outgo will be INR 1,20,293.
While the EMI amount will be INR 14,168 if we take the interest rate of 15.99% per annum. The interest amount that an individual needs to pay will be INR 1,80,044.
So, you can see the substantial difference of around INR 2,000 per month in the EMI amount and you will have to pay INR 60,000 less if you choose lower personal loan interest rates. That’s why it is always advised to choose a lender with affordable rates.