When you apply for a personal loan, the monthly instalment amount that you will be paying becomes a key factor in deciding the loan amount and tenure. You can either use a personal loan EMI calculator or the below formula to calculate your pay-outs. This helps you in planning the loan amount and repayment schedule better.
Ideally, the interest rate on a personal loan is calculated by considering several factors. Your credit history, monthly income, the amount being borrowed are a few among them.

Factors Affecting the Personal Loan EMI

The following are the factors that affect your loan EMI.

• Loan Amount:  The higher the loan amount, the higher the EMI payable. The maximum loan amount you can avail is decided by the lender based on your repayment capacity, relationship with the bank, and other factors.
• Rate of Interest: The rate of interest is also directly proportional to your EMI. Your loan’s interest rate is based on several factors, such as your income, your credit history, repayment capacity, etc.
• Loan Tenure: The loan tenure is inversely proportional to your EMI. The longer the tenure, the lower the EMI.

Calculating the Personal Loan EMI

Have a look at the below method that explains how you can calculate the interest amount on the total loan amount.

The interest amount is not the same for each month. The interest amount is higher at the beginning, which reduces gradually in the following months.

Calculate Interest for the First Month

1. Convert your annual interest rate into a monthly interest rate. To do this, you will need to divide the annual interest rate by 12, i.e. if the interest rate is 20% per annum, then divide 20/12, which yields 1.66%. This is your monthly interest rate.
2. Multiply the interest rate with the total personal loan amount, i.e. if you are taking a personal loan for 30000 at a monthly interest rate of 1.66%, then [(1.66/100)*30000 = 498] is the interest amount for the first month.
3. Calculate the total

Calculate Interest for the Following Months

Since, you have started to pay off your principal, use the below calculation to find out the interest amount for the following months. 

1. Subtract the interest amount of the first month from the amount you repaid. This gives you the amount that you have paid against the total personal loan principal.
2. Now, subtract this amount from the original principal to find the new balance of your loan.

          New balance = principal – (EMI – interest) 

Additional Read: How We Can Get Instant Personal Loan Online?