Top Methods to Look for While Calculating the EMI on Personal Loan

Any individual can get an unsecured Personal Loan and use it for end purposes they see fit. Since these loans are unsecured, the interest rate is likely to be greater than secured loans. Therefore, it's sensible to take out Personal loans only for short-term, emergency needs.

As long as the money is used to address a genuine need, borrowers have complete freedom to decide how the loan will be used – be it for business, a wedding, college tuition, or a vacation abroad.

Before you apply for Loan, let's get down to the basics to learn more.

Tools for Equated Monthly Installment Payments

To determine your monthly payment for a Personal Loan, you can use the techniques outlined below in conjunction with a personal loan calculator.

● After determining the lowest and highest loan amounts that your preferred lending institution is willing to approve, enter those figures into the first tab of the EMI calculator.

● When you've verified that you're not paying more than the bank's minimum lending rate, you can enter the loan's interest rate (per year).

● Provide a desired loan payback duration between the bank-specified minimum and maximum. Most Personal Loans have repayment terms of up to 5 years for convenience.

Using the PMT Formula for Calculation

This is a relatively more time-consuming and complicated method to determine your loan EMI. To determine the EMI, use Microsoft Excel and apply the PMT formula, where:

● Your EMI is PMT

● The NPER, or several periods, represents the total number of loan payments

● P.V. denotes principal value or loan amount

● The rate of interest is represented as a decimal

● For those interested, the equation is: PMT (Rate, NPER, P.V.)

As a more indirect and perhaps error-prone alternative, you can try out the formula for different permutations and settle on the one with the lowest EMI.

Advantages of a Low Personal Loan Rate

The ability to pay monthly payments in the form of EMI is a goal for many borrowers. Here are some things to keep in mind that can raise or lower your monthly installments on a Personal Loan:

● Interest Rate and Credit Rating - A three-digit number that summarises a person's credit report. One's borrowing history, loan repayment history, and other financial habits are all documented in a credit report. When your credit score exceeds 700, you have a better chance of getting a loan with favourable interest rates and terms. Payments on an EMI will be reduced if the interest rate is reduced.

● Quantity of Credit Obtained - If you pay less on your Personal Loan, the cash flow may be affected by EMI payments until the loan is paid off. On the other hand, here are some things you may do to lower your EMI and maximise your financial opportunities.

⮚ Try negotiating a lower interest rate to save money on your Personal Loan.

⮚ Depending on your history with the financial institution, you may be able to negotiate a better interest rate.

● Keep Your Credit Rating Up - Keeping your credit rating in good shape will make loan negotiations much more accessible. One's credit scores heavily influence one's loan qualifications and interest rate. A good credit score of 750 and above will get you the best EMI rates.

● Choosing a Longer Repayment Term - Having extra time to make payments is a big benefit of a longer tenure. You can lengthen the loan's term if the EMI you'd have to pay over a shorter period is prohibitive.

Can You Be Sued for a Missed Personal Loan EMI Payment?

After applying for a Personal Loan, if you fail to pay an EMI as agreed, you could face consequences. For example:

● Penalties - If you are late with an EMI payment, your lender will likely charge you a late fee penalty of around 1%-2%.

● Creditworthiness - Payment defaults on EMIs harm both your credit score and your reputation. A decent credit score isn't always enough to convince loan companies to lend you money.

A credit score measures one's financial reputation and your credit rating may take a severe hit if you default. For each late payment, your credit score drops, making it more challenging to secure a loan in the future.

Conclusion

If you need help budgeting for your monthly EMI payments on a Personal Loan, you can use a Personal Loan Calculator to get an estimate. Due to the potential for error when performing calculations by hand, it is recommended that you use an automated calculator to determine your exact repayment amount.

Instead of figuring out the monthly payment for a Personal Loan on your own, using an online EMI calculator may be more efficient.