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Usually, personal loans are unsecured loans and are available for both self-employed and salaried borrowers in order to help them to meet their private expenses that are immediate and urgent in nature. As mentioned above that the personal loans are unsecured loans and can be availed quickly without any security. However, the interest rate on personal loans is generally higher than that on secured loans. There are several providers of personal loan in India which offer quick and cheap loans. A personal loan is availed only if:

  • The borrower is in the midst of a financial crunch and requires immediate funds.
  • The borrower doesn’t have that much time to go through detailed documentation and procedure.
  • The borrower doesn’t have any collateral to take a secured loan.
  • The borrower is looking for is a short term loan (not more than five years).

Benefits of availing a personal loan: –

  • There is no requirement of collateral or security in order to avail a personal loan
  • Fast turnaround time with quick loan approval within a few hours. In addition to this, banks now also offer instant personal loans as well.
  • Less documentation as compared to a secured loan.
  • Approval based on basic KYC, quick and fast background checks, income proofs and CIBIL Score.

Some factors that affect Personal loan EMI

  • Loan amount – This is the sum which a borrower anticipates to take from the bank in the form of a personal loan. Higher the loan amount, higher the EMI will be.
  • Rate of interest – This is the rate of interest charged by the lender bank on the borrowed loan amount. Lower the rate of interest on a personal loan, lower the EMI.
  • Loan Tenure – This is the period for which you have taken the personal loan. Longer the tenure of the personal loan, lower will be the EMI. However, the personal loan tenure available all across banks is 5 years, subject to current and retirement age of the borrower.

Following is an illustration which will provide you with a comparison of EMI for an Rs. 1 lakh loan at different tenures:

 Tenure of the loan 2 years 3 years 5 years
EMI amount on loan amount of Rs. 1 lakh at 10.99% Rupees. 4,660 Rs. 3,273 Rs. 2,174
Total amount you will be paying including interest and principal Rs. 1.24 Lakh Rs. 1.38 Lakh Rs. 1.72 Lakh
Interest you have to pay over loan tenure Rs. 24,214 Rs. 38,438 Rs. 71,959

For a 5-year personal loan at a rate of 10.99%, the EMI is Rs. 2,174 per lakh. A borrower will be required to pay an interest of Rs. 71,959 on his loan amount of Rs. 1 lakh over 5 years. On the contrary, if the borrower wishes to avail a 2-year term loan at the same interest rate, he will have to pay a higher EMI of Rs. 4,660 and total interest of Rs. 24,214, which is much lesser than what you paid for a 5 years loan.

Benefits of EMI Calculator

EMI calculator allows you to calculate your loan EMI and has several benefits, which are listed below-

Saves time: EMI calculator helps the borrower of the personal loan in doing tedious calculations by calculating EMI in just seconds, as the potential borrower will get the output immediately as the moment he enters the required details.

Provides accurate results: Online EMI Calculator will provide the borrower with accurate results, as wrong EMI calculations may lead to change the decision of the borrower while taking a loan. Therefore, it is better to use online EMI calculator to get accurate results.

Allows to evaluate multiple schedules: EMI calculator allows the borrower to view the amortisation schedules and EMIs for multiple combinations of interest rates and loan tenures, thus allowing the borrower to choose the EMIs that suits his repayment or servicing capabilities.

Personal Loan EMI Calculator Formula

Apart from the online EMI calculator, the borrower can also calculate his monthly EMI with the use of a mathematical formula. The formula to calculate loan EMI is given below-

P*r* (1+r) ^n/([(1+r) ^n]-1)

In the given formula, ‘P’ is the borrowed amount of loan

‘r; is the interest rate per month

‘n’ is the tenure of the personal loan in months

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April 2024