Check EMI Using A Personal Loan Calculator - Personal Loan Blog - Tata Capital

Understanding EMI And Personal Loan Calculators

Feb 28, 2017

Salaried employees live from payday to payday and whenever some urgent requirement for money rises, they turn to borrowing money. With the limited income and rising expenses, taking personal loans has become such an integral aspect of our lives. Prior to taking a loan, we look into different sections like personal loan eligibility, interest rates, documentation and EMI, which is the most important factor for a borrower. People are often confused as to how EMIs are calculated and to help borrowers here's a detailed look at EMI.

Loan Amortization Schedule

It's a tabular presentation of the EMI defining the interest component and principal component. With this schedule, borrowers can figure out the loan being paid and the outstanding amount alongside payment tenure and principal payment. This comes handy when the borrower decides to foreclose the loan or refinance it.

What influences EMI?

There are three components that impacts the EMI of a loan:

  • Loan amount, which is the total amount borrowed by the person,
  • interest rate, which depicts the interest charged on loan amount, and
  • loan tenure that is the agreed upon time period for loan repayment.

Sometimes the EMI varies based on the type of interest on the loan. The EMI remains unchanged during the entire tenure when the interest rate is fixed. But with the floating interest rates fluctuating as per market rates, the EMI changes as well.

Calculating EMI

EMI can be calculated manually by a mathematical formula [P x R x (1+R)^N]/[(1+R)^N-1] wherein P refers to the loan amount, R stands for interest rate and N is the tenure in number of months.

Taking a pen and paper to punch numbers for calculating EMIs is a good idea but along with cash crunch, we are also pressed for time to manually calculate EMIs. That's why lending institutions provide personal loan EMI calculators that need borrowers to enter the loan amount, loan duration and interest rates to help them with important financial decisions.