How to Calculate the EMI on a Personal Loan?

Personal loans have gained quite the reputation amongst working class households. From filing in the financial gap for your child’s education to aiding in times of medical emergencies, personal loans can swoop in to save the day. Such unsecured loans are sanctioned by banks or financial institutions. While issuing a personal loan, financial institutions take into consideration certain parameters like your credit history, salary, employment status, and repayment history.

One such factor, which is likely to play a key role in determining everything from your loan amount to loan duration, is Equated Monthly Installments (EMIs). Your personal loan EMI is nothing but a monthly instalment towards repaying your outstanding loan.

It is very crucial to calculate the EMI of your personal loan beforehand to get a sense of your monthly budget. Failing to understand the same can hugely disrupt your monthly cash flow. Let’s look at the various ways through which you can calculate your EMIs.

Calculating EMI through excel sheet:

One of the simpler ways of calculating your personal loan EMI is by using an Excel spreadsheet. It is important to note that in an excel sheet the function to calculate the EMI is PMT. You need three important variables i.e the rate of interest (rate), the value of your loan or present value (pv) and the total number of repayments to be made (nper), to get started. The other two values, the future value of the loan (fv) and type are optional. You would generally need to either keep these blank or insert the value ‘0’. The formula which you can use in excel is: = PMT (rate,nper,pv,fv,type). It is important to convert your rate as well as the loan tenure years into monthly values.

Let’s take a simple example. Imagine that you have taken a personal loan of Rs 7 lakh for a tenure of 4 years at an interest rate of 13%. By using the formula in excel sheet, your EMI would be = PMT (13%/12,4*12,700000,0,0). Your EMI would then amount to 18,779.25.

Using Mathematical formula:

Calculating EMI using Excel is sometimes difficult if you’re not proficient in Excel usage. In such a situation you can use a hand calculator to calculate your personal loan EMI. The formula for calculating EMI is:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1],

Here P denotes your loan amount or the principal, R stands for the interest rate per month, N is the number of monthly installments.

Using Online Calculator:

Using a calculator or excel sheet is not for everyone and can sometimes lead to errors. Hence, the best way to calculate your personal loan EMIs is by using an online personal loan EMI calculator. Following are the steps to use the online calculator

Step 1: A personal loan EMI calculator considers three main variables i.e. Interest Rate, Loan Amount and Tenure.

Step 2: You have to either enter this value into each mentioned category or adjust the value sliders as per your preferred value.

Step 3: After entering this value into each mentioned category,the online calculator will provide you with results within seconds. You will know the exact personal loan EMI you have to pay, as well as the total interest payable, along with your total payment (Principal + Interest). You can also reduce the tedious task of calculating your EMI manually by using the Bajaj Finserv Personal Loan EMI Calculator available on Bajaj Markets.

Conclusion

Using an online personal loan EMI calculator is not only easy but also saves on time, while using Excel or a hand calculator might lead to a lot of wastage of time. The online calculator provides accurate results, thereby ensuring you make a more informed decision.

It is always advisable to consider EMI amounts which aligns with your monthly budget. Defaulting on loan repayment may hurt your credit score. This may also impair your ability as a loan borrower to avail a loan in the future. After calculating your desired EMI amount with the Bajaj Finserv Personal Loan EMI Calculator, you can apply for the Bajaj Finserv Personal Loan available on Bajaj Markets, loans of up to Rs. 25 lakhs, with very flexible repayment tenures ranging from 12 months up to 60 months. The personal loans on Bajaj Markets also come with value added benefits like zero collateral and minimal documentation needed and lightning quick disbursal periods.