Applying for a personal loan is now simpler than ever. With several financial institutions offering pre-approved loans for both short and long tenors and a wide range of income groups, financial freedom is more accessible than it has ever been. However, it is still imperative that you find the right plan based on your personal loan eligibility. One of the first steps to take when applying for a personal loan is to use an online personal loan calculator. Here’s how it works and how it can help you find a low-interest personal loan.
When you apply for a loan, three key terms come into play: interest rate, loan tenor, and loan amount. Based on these factors, your lender calculates the repayment sum you owe each month, also known as your EMI. The formula for calculating this amount is complex and leaves a large margin for error.
Miscalculating your EMI could result in you applying for what you thought would be a low-interest personal loan, only to discover it requires a larger repayment sum than you realised. It could also cost you significant financial strain in the form of fines for missed payments. The online personal loan calculator runs the formula for you accurately, ensuring that there is no error in your forecast. All you have to do is plug in your loan amount, interest rate, and tenor to calculate personal loan EMI.
A low-interest personal loan is what every applicant wants. However, the total interest you have to pay on a personal loan doesn’t depend on the interest rate alone. Low interest rates may be offered on a flexible basis, which means the rate could increase in the future depending on the market standard. A low interest rate may also accompany a long loan tenor, which means that over a longer time, you’ll be paying off a relatively higher sum than if you’d taken a short-term loan at a higher rate.
Calculating these variables can be a tedious task and any errors could cause significant financial damage. An online personal loan calculator allows you to accurately predict what your potential monthly repayments will be, so you can make an informed decision before you apply. Since you can do multiple calculations with different loan amounts and tenors, this calculator helps you understand your debt obligations more clearly.
When you calculate Personal loan EMI using this online tool, you will be given four sets of information. Firstly, you will be shown the EMI that is owed as monthly repayment. This can help you see if the loan is affordable for you. It can also help you compare the interest rates of different lenders by keeping the principal and tenor the same and just tweaking the interest rate. Further, it can help you choose the right loan amount too.
Secondly, you will be able to note the total interest payable on the loan, which helps you assess the cost of borrowing better. Lowering your loan amount or your tenor can help you decrease this amount and vice versa.
Thirdly, you will see the total payment, which is a sum of the loan amount you have borrowed and the total interest levied on it. This is the total amount you will repay and is crucial in repayment planning. Calculators like the Bajaj Finserv Personal Loan EMI Calculator also display this break-up visually in the form of a pie chart with percentages that further help in understanding. Reducing the tenor can help you decrease the interest you end up paying, as the interest increases with the repayment duration.
Finally, you will see an amortization or repayment schedule that depicts the break-up of interest amount and principal amount till the end of your loan tenor. The reason these pieces of information are important to know before you apply for a personal loan is that at some point in the future, you may want the option of pre-paying a portion of your loan to decrease the overall interest owed. Having this information available before you apply, and even during repayment, could help you save a significant sum of money in the long term.
Once you know how to use an online personal loan calculator to compute your EMI, you can start your search for the right low-interest personal loan such as the Bajaj Finserv Instant Personal Loan. With collateral-free funding of up to Rs.25 lakh and a flexible tenor of up to 5 years, your financial risks are minimal. What’s more, you can opt to pay only interest as EMIs by choosing the Flexi facility to lower your EMIs by up to 45% during the initial tenor. Check your pre-approved offer by providing your name and contact information and get the funds set aside for you instantly!