Personal loan: How to use EMI calculator to change your monthly instalment | Mint

When you take out a personal loan, one of the most important considerations is to check the monthly instalment to pay off your debt. In case you are wondering how you can lower your equated monthly instalment (EMI), you can use the personal loan EMI calculator to tweak your monthly instalment.

You can do this by changing three factors, which together comprise your monthly EMI. These three factors will determine how big or small your monthly instalment will be.

Suppose you have taken a ₹15 lakh personal loan, which you will repay in three years with 12 per cent interest. The current EMI is ₹49,821.

Suppose you want to pay only ₹40,000 a month. What will you do in that scenario? The personal loan EMI calculator can help you optimise it.

Three crucial factors affect your EMI 

I. Total loan amount: The bigger the loan amount, the larger the monthly instalment. For instance, when you have a ₹15 lakh loan, your monthly EMI would be ₹49,821.

Now if you want to reduce your EMI to ₹40,000, you will have to reduce the loan amount. The minimum loan amount that you can settle for is ₹14 lakh, so the EMI will drop to ₹46,500.

But since you do not want the loan amount to be reduced further, you can explore other considerations to bring it down.

II. Rate of interest: In the current scenario, the interest rate is 12 per cent. Since the bank will not agree to bring down the interest rate further, the only option that you have is to explore the last variable — the tenure of the loan.

III. Loan tenure: Finally, while using the personal loan EMI calculator, you can raise the loan tenure in order to cut down on loan EMI. If the loan tenure is 48 months, your EMI will be ₹36,867.

Since you want an EMI of ₹40,000, you can afford to stretch your loan tenure slightly – say 42 months. Now the calculator will show that the EMI has become ₹40,985.

To sum up, you will realise that you will have to opt for a loan tenure of 42 months in order to repay your loan of ₹14 lakh at 12 per cent interest and ensure that your EMI stays around ₹40,000.

These calculations can be carried out seamlessly with the help of a personal loan EMI calculator. 

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(Note: Raising a loan comes with its own risks. So, due caution is advised)