What To Do When Your Bank Fails
The purchase of any big-budget commodity often involves a loan. And why shouldn’t it? Credit is an enabler for most of us, allowing us to invest in ourselves, entertain, and even deal with emergencies and harsh times. India is a thriving credit market, with various loan options available across the country. Repayment of these loans is usually done in monthly installments called EMIs, an abbreviation for Equated Monthly Installments.
The EMI amounts matter a lot when you’re availing a loan
They help you decide:
- Which lender is affordable,
- How quickly you can repay the loaned amount, and
- If you can repay the amount, among other things
But isn’t it taxing to manually calculate the EMIs for loan options and find out the best one for you? This is exactly why there exists a wonderful financial tool – called an EMI calculator. EMI calculators make your financial planning a lot easier.
What is an EMI Calculator?
Every EMI amount is calculated based on three parameters – interest rate, principal amount, and tenure. Mathematically, EMI is calculated as under,
EMI = P * R * (1+R)^N / [(1+R)^N-1] where,
P = Principal amount of the loan,
R = Rate of interest, and
N = Number of monthly installments
An EMI calculator computes and displays the amount to be paid every month using this complex formula. All you need to do is enter the three parameters and you get the results in an instant.
How does it help in financial planning?
Know accurate EMI amounts in advance
Since these calculators are automated, there’s no room for errors while calculating your loan EMI amount unless you input the wrong values. This ensures smooth repayment and superior monetary planning. You can know the EMI amounts in advance before taking the loan, which helps in going for the right personal loan provider. People who don’t use the calculators approximate the EMI amounts and undergo a lot of stress during repayment due to lack of accurate knowledge beforehand.
Pick the right lender
Most EMI calculators give you a pictorial depiction of the monetary values that help you have a better sense of understanding. This pie-chart/graph includes the interest amounts you’re going to pay.
Choosing the best lender ultimately comes down to the interest rates they charge and this pictorial depiction can help a lot in picking the right lender. That small 0.5% change in the interest rate can initially seem trivial but can impact the repayment heavily. By keeping the principal amount and the tenure constant and varying the interest rates, you can find the most affordable lender to avail a personal loan from.
Choose the right loan amount and tenure
One great advantage of an EMI calculator is that you can use it as many times as you want to. If you feel that the EMIs are too high, you can decrease the principal amount or increase the tenure, or do both in the calculator until you reach the best-suited parameters for you.
One important thing to keep in mind is that the longer the tenure is, the more you’re going to pay as interest in your loan EMI. But the shorter the tenure is, the higher the loan EMIs are going to be, with lesser interest amounts. Change the parameters and find out the right principal loan amount and the tenure according to your repayment capacity.
Know your repayment capability
EMIs are going to eat up a major chunk of your income. It’s therefore important to know the EMI amounts beforehand to plan your finances accordingly. Based on your fixed and variable expenditures per month, you can allot the right amount of money for your personal loan EMIs and decide the tenure and the principal amount based on this. Customization is the best advantage an EMI calculator provides, which is key to good financial management.
Relying on an EMI calculator when it comes to loans is highly advised. There are tons of loan EMI calculators on the web, and each varies when compared to the other in terms of the way they display while the functioning is the same. We, at StashFin, have our own EMI calculator that you can use. It features a slider scale to enter the parameters with ease (or you can type them in) and display the EMIs to be paid in a box below.
Worried about personal loans? Don’t be anymore.