Finance

# How to Calculate Your Personal Loan EMI in 3 Easy Steps An instant personal loan can help you find immediate expenses such as your child’s higher studies, a family wedding or business expansion. There are no restrictions on the end-use of a personal loan and you can take one without pledging any asset as security. However, to be smart about your finances, borrow only what you can afford. This means considering the principal, the applicable interest rate and the tenor you wish to choose.

To be precise about your EMIs and know your total outgo beforehand, use a personal loan EMI calculator. This tool provides you with an easy way to compute your EMIs; however, it isn’t the only way to do so. Here are 3 ways how you can calculate your personal loan EMIs and the easy steps you can follow for each.

What are the essential loan factors that affect EMIs?

When calculating EMIs using a personal loan calculator or manually, you will require values for the following three attributes.

Principal: This is the amount you borrow and is also known as the loan amount or sanction. The larger the principal, the bigger will your EMIs be.

Tenor: This is the period over which you will pay EMIs. Generally, lenders offer a repayment tenor of up to 5 years for personal loans. The longer the tenor, the smaller will your EMI amount be.

Interest rate: This is the rate at which interest is charged on the principal borrowed. The higher the interest rate, the larger will your EMIs be.

How to calculate EMI using a personal loan EMI calculator?

An online personal loan EMI calculator ensures high accuracy in output within moments. To use it, all you need to do is enter the values for the principal, interest rate and tenor. Based upon these, the calculator displays the payable EMI amount. Consider this example,

• Principal = Rs.20 lakh
• Interest rate = 15%
• Tenor = 60 months

On entering these values into the calculator, the tool displays Rs.47,580 as the EMI amount.

You can tweak the input variables until you arrive on an EMI amount you are comfortable paying.

How to calculate EMI manually

READ  How to Make and Stick to a Budget in College

You can calculate your EMI amount manually using the following two methods.

• Calculating EMI using formula

Below is the formula to calculate the EMI amount.

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

P is the principal amount

R is the personal loan interest rate

n is the number of EMIs or the tenor in months

To help you understand the application of the formula, consider this example: You apply for an instant personal loan of Rs.20 lakh, the interest rate is 15%, and the tenor you choose is 60 months.

For calculation, the interest rate per month is required and so, R = 15/12 = 1.250 then:

P = 20 lakh

R = 1.250%

N = 60

Now, (1+R)= (1+.01250) 60  = 2.10718

Therefore, EMI = (2000000*.01250*2.10718)/(2.10718-1) = Rs.47,579.88

When rounded up, your EMIs amount to Rs.47,580.

• Calculating EMI via Microsoft Excel

If you know your way around Excel, then you can use the PMT function to know your EMI amount. The function has the following three variables:

r is the rate of interest

NPER is the repayment tenor

PV is the principal

To calculate your EMI, open an excel sheet and type in the value of the principal amount, interest rate and tenor, one below the other. Here, the principal will be 20,00,000, the tenor will be 60 (5 years), and the interest rate will be 0.0125 (15%/12).

Then select a cell and enter, “=PMT(r, NPER, PV)”

For the values of r, NPER and PV you can select the cells containing the data. For instance, if you had entered the values into the cells A1, A2, and A3, your formula would read, =PMT(A1, A2, A3).

The result generated is -47,579.86 and here, the negative sign indicates outflow of cash.

Now that you know how to find out your EMI amount with the personal loan calculator and manually, apply for a personal loan with the right lender. When you avail a Bajaj Finserv Personal Loan, you get access to a principal of up to Rs.25 lakh repayable over a maximum of 60 months at a competitive rate of interest. Moreover, with the Flexi Loan feature, you can borrow from your sanction in parts and limit your interest payments to the amount withdrawn. Owing to its simple eligibility criteria and hassle-free application process, Bajaj Finserv offers you an instant personal loan, with approval within 5 minutes and disbursal within 24 hours. To get access to instant financing through a customised deal, check your pre-approved offer from Bajaj Finserv today.