A personal loan is an unsecured loan type that enables you to borrow money in one lump sum for a variety of reasons, including home improvements, higher education, wedding costs, unforeseen medical needs, etc. Despite the fact that a personal loan gives you rapid access to funds, it’s critical to comprehend your repayment commitments. In this case, a personal loan EMI calculator is useful. In this post, you’ll learn how a personal loan EMI calculator might benefit Indian borrowers at various points in the personal loan application and repayment process.
Understanding Loan Details Upfront
One of the primary advantages of utilizing a personal loan EMI calculator is that it enables you to comprehend the loan terms, including total interest payments, loan tenure, etc. before you even apply for the loan. You can feed different loan amounts, interest rates, and tenures to see how it impacts your monthly EMI.
For instance, the EMI calculator will show that your approximate monthly EMI, if you need to borrow Rs. 500,000 for 5 years at 12% interest, will be Rs. Knowing these details upfront allows you to decide if you will be able to comfortably pay the EMI each month for the loan’s length. It also gives you an approximate idea of how much interest you will pay overall.
Comparing Loan Offers
Personal loans are available from several banks and non-banking financial companies at various interest rates. You may quickly and easily compare loan offers from several lenders using an EMI calculator. You can feed the loan amount, tenure, and interest rate quoted by each lender to see the impact on monthly payments.
This helps you choose the best deal with the lowest interest rate. For instance, if one bank is offering a Rs. 500,000 loan at 12% interest while another offers the same loan at 11.5% interest, the EMI calculator will show you save around Rs. 500 per month with the second bank. Over the 5 year tenure, this can amount to savings of thousands in total interest cost.
Planning Your Monthly Budget
Once you have zeroed in on a loan offer and amount, the EMI calculator helps you plan your monthly budget accurately. You will know exactly how much EMI burden you are taking on each month for the next few years.
This allows you to allocate funds from your monthly income towards other expenses like rent, bills, groceries, etc. accordingly. You can also check if you have a sufficient buffer every month in case of emergencies or a temporary reduction in income. Proper budgeting upfront ensures you do not default on loan repayments due to unplanned expenses.
Tracking Extra Repayments
Many borrowers want to repay loans faster to reduce the total interest outgo. An EMI calculator makes it easy to check the impact of additional or prepayments you make towards the loan principal from time to time.
For example, if your EMI is Rs. 25,000 but you pay Rs. 30,000 one month, the calculator will show how many months the loan tenure reduces by with that extra payment. This motivates borrowers to repay additional amounts and helps track their progress towards becoming loan-free faster.
Dealing with Interest Rate Changes
Personal loan interest rates are usually floating and linked to the bank’s MCLR or external benchmark. So the rate is likely to change during the loan tenure. An EMI calculator allows you to check how much rate changes impact your monthly payments.
For instance, if the rate increases by 1% after 2 years of loan, the calculator will show your new higher EMI. This prepares you mentally and financially for rate hikes. You can also check options like foreclosing the existing loan or shifting it to another lender offering lower rates at that time.
A personal loan EMI calculator is a very useful financial tool for Indian borrowers. It provides transparency on loan details, helps compare deals, plans budgets accurately, track additional repayments, and deals with interest rate fluctuations efficiently. Using a reliable EMI calculator can go a long way in managing personal loans smoothly over the repayment period. Borrowers are advised to calculate EMIs for different scenarios before finalizing any loan. Additionally, a mutual fund sip calculator can also be handy when considering various investment options alongside your loan planning.