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Understanding EMI in Personal Loans and How to Calculate it?
Posted on Wednesday, June 7th, 2023 | By IndusInd Bank
When you’re taking a personal loan, Equated Monthly Installments (EMIs) play a significant role in determining your repayment schedule. Understanding how EMIs work and calculating it accurately is crucial for effective financial planning. In this blog, we will discover the concept of EMI in personal loans, explore the factors that influence EMI calculations, and guide you through the process of calculating EMI.
What is EMI?
Equated Monthly Installment (EMI) is the fixed amount that you need to repay each month to the lender for the duration of the personal loan. It comprises the principal amount you borrowed plus the interest charged by the lender.
Components of EMI
1. Principal Amount: The principal amount represents the total amount borrowed from the lender.
2. Interest Rate: The interest rate is the percentage charge levied by the lender on the principal amount. It determines the total cost of borrowing and affects the amount to be repaid.
3. Loan Tenure: The loan tenure refers to the duration for which you borrow the funds. The loan tenure directly impacts the EMI amount and the total interest paid.
Calculating EMI Using an Online EMI Calculator
Calculating EMIs manually can be time-consuming and complex. Fortunately, some of the leading lenders like IndusInd Bank provide online EMI calculator that simplify the process. Here are the steps you need to follow to calculate your EMI accurately using an IndusInd Bank Personal Loan EMI calculator.
- Enter the loan amount you wish to borrow (principal amount)
- Adjust the interest rate and the loan tenure (in months)
- Click on the “Calculate” or “EMI” button to obtain the result.
The online EMI calculator will provide you with the EMI amount. You can try out different variations of interest rate and tenure to check which combination aligns the best with your budget.
Managing EMI Payments
Once you have calculated your EMI using the EMI calculator, it’s essential to manage your payments effectively. Here are some tips that you can follow:
- Plan your monthly budget wisely to ensure you allocate sufficient funds for EMI repayment.
- Opt for automatic EMI deductions from your bank account to avoid missing any payments and late fees.
- Consider foreclosing your loan if you are able to arrange funds, to save on interest and overall total loan cost.
- A good credit score can help you negotiate better interest rates and loan terms, reducing the overall cost of your personal loan.
Conclusion
Understanding how EMIs work and using an online EMI calculator to calculate them accurately is essential for effective financial planning. By considering the principal amount, interest rate, loan tenure, and using an online EMI calculator, you can gain clarity on your loan repayment and manage your finances efficiently.
If you’re looking for an instant personal loan at best-in-class rates, then do check out IndusInd Bank Personal Loan that is mindfully designed to fit into the varied needs of individuals as per their lifestyles. With IndusInd Bank Personal loan, you get to enjoy instant approval, quick disbursal, and flexible repayment tenure options. That’s not all, its application process is 100% paperless with minimal or low processing fee*.
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.
