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Learn All About Calculating EMI Using an Online Calculator
Posted on Thursday, February 29th, 2024 | By IndusInd Bank
A personal loan is a type of unsecured loan offered to individuals from banks or financial institutions. Securing the lowest interest rate on a personal loan is a financial goal for many borrowers. When you take a personal loan, you typically agree to repay it in fixed monthly instalments, known as Equated Monthly Instalments (EMIs). EMI has become an omnipresent term in the financial world, representing a structured approach to loan repayment. EMI allows borrowers to repay the loan in fixed monthly instalments over a specified period. The instalment includes both principal repayment and interest, and the amount remains constant throughout the tenure of the loan, making it convenient for borrowers to budget and plan their finances. The structure of EMIs ensures a gradual reduction of the loan balance over time, with a shifting proportion allocated to principal repayment as the loan term progresses.
Also Read: What are the documents required for Personal Loans
What is an Online EMI Calculator
Now, let us understand what an online EMI calculator is.
An online EMI calculator is a digital tool available on websites or apps that allows users to quickly calculate their Equated Monthly Instalments (EMI) for loans. The personal loan EMI calculator is widely opted for various types of loans such as personal, home, and car loans. Users input details such as the loan amount, interest rate, and tenure, and the calculator provides an estimate of the monthly repayment amount. IndusInd Bank Personal Loan Online EMI Calculator is a useful tool that aids in the management of your finances effectively. Calculating EMI using an online calculator is a straightforward process that helps individuals plan and manage their loan repayments effectively. To calculate EMI, you will need key information such as the loan amount, interest rate, and loan tenure.
Example of Calculation Using Online EMI Calculator
Let’s explore simple steps to calculate EMI using an online calculator.
Here are the general steps:
- Open a web browser and search for “EMI calculator.”
- Choose a reliable online EMI calculator tool from the search results.
- Enter the loan amount, interest rate, and loan tenure (months or years) as the calculator prompts.
- Click on the “Calculate” or “Generate EMI” button. The EMI calculator also provides a breakdown of the principal and interest components.
This helps you understand how much of each payment goes towards repaying the loan amount and how much is interest.
The calculator works on the mathematical formula,
EMI = P × r × (1 + r)n/((1 + r)n – 1)
where P represents the principal loan amount, r is the interest rate per month (annual rate divided by 12 and multiplied by 0.01), and n indicates the number of monthly instalments.
For example, Dilip has taken a personal loan of Rs. 100,000 for two years at an interest of 20 % p.a.
- We will convert the interest rate into a monthly rate and the tenure into months.
- Now, we will calculate the monthly interest rate. For that, we will divide the interest rate by the number of months in a year, i.e. 12, so monthly 20/12 = 1.66% per month.
- We will convert the two years loan tenure into months. i.e. 24 months
Inputting the values in the formula, we get,
EMI = P × r × (1 + r)n/((1 + r)n – 1)
EMI= [1,00,000 x 1.66/100 x (1+1.66/100) ^ 24 / [(1+1.66/100) ^ 24 – 1)
EMI= Rs. 5,089
(Note: The above values are taken just for demonstrative purposes)
Conclusion
In conclusion, online EMI calculators provide a quick and efficient method for borrowers to estimate their Equated Monthly Instalments accurately. The online calculators offer users a user-friendly interface and instant results, aiding individuals in their financial planning and decision-making.
Looking for the best EMI Calculator? Click here.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
