If you are planning to take a personal loan, it is recommended to find the optimum personal loan monthly instalment or equated monthly instalment (EMI). And it helps to use a personal loan EMI calculator to be able to calculate the right EMI.
There are three inputs required to be able to find the right monthly instalment. These inputs are loan amount, loan tenure and rate of interest.
Let us understand how can we use the EMI calculator:
I. Loan amount: The bigger the loan amount, higher the EMI and smaller the loan amount smaller the EMI. So, if you want to pay a smaller instalment, one of the easiest ways to do so is to reduce your loan amount. But if you can not compromise on that, what will you do? You can consider the other two determinants.
II. Rate of interest: Another factor that influences the loan EMI is the rate of interest which is charged on the loan. Higher the interest rate, lower the EMI and conversely, lower the rate of interest, higher the instalment.
So, if you want to reduce your monthly instalment, you need to look for a loan which charges a lower rate of interest. For that you need to look for a bank or non banking financial corporation which charges a lower interest.
III. Loan tenure: Finally, the last determinant which influences the instalment of loan is its tenure. When the tenure of loan is long, it would have a smaller EMI and conversely, when the loan tenure is short, the loan would have a large EMI.
So, a loan applicant can tweak these entries to compute the ideal EMI which one is looking for. Let us understand this with this example. Suppose when you take a ₹5 lakh loan for two years, the monthly EMI would turn out to be ₹23,537.
As you raise the loan tenure to three years, the monthly instalment would decline to ₹16,607. But if your goal is to bring down the EMI to ₹13,500, you can raise the loan tenure to four years, following which your EMI would fall to ₹13,167.
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