A personal loan is often obtained in case of emergencies or when one is in urgent need of funds. The onset of COVID-19 has compounded such a need for many people in the country. However, before obtaining such a personal loan, it is wise to be aware of the total payment to be made over the tenure of the loan.
Such information can be calculated using the EMI which is to be paid monthly to the financial institution. The EMI along with the schedule of payment is given with each loan however, the borrower must be aware of how EMI is calculated. This will ensure that a borrower makes an informed decision.
Manual calculation of EMI
One can either set up or use a personal loan EMI calculator using an application such as Microsoft Excel. Or use one of the myriad calculators which are available online.
Firstly, let us understand how an EMI is calculated. The formula for calculation of EMI is dependent on three main factors i.e. the amount of loan taken, rate of interest as well as time to repayment. Such formula is as follows:
EMI = [P * R * (1+R)^N] / [(1+R)^N-1
Where P = Principal
R = Rate of Interest
N = time period
Calculation in Excel:
Apart from such manual calculations, EMI can also be calculated using the financial function in excel which can provide the data instantly.
Online Calculators:
EMI can also be calculated using online calculators wherein the user has to merely enter the details regarding the loans to calculate the EMI. The user can also know different EMI by changing tenor of loan, interest rate or principle to suit their need,,
An understanding of how EMI is calculated and basic knowledge of its computation enables one to become better informed and avoid being taken for a ride. With several personal loans being sold online, a personal loan EMI calculator turns out to be a handy decision making tool.
Must Read: 5 Tips to Acquire Attractive Deals on Your Personal Loan Interest Rate
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