Personal loan: You can use EMI calculator to determine monthly instalments; check how | Mint

When you want to raise a personal loan for an immediate need, there are a number of banks and non-banking financial institutions (NBFC) which you can approach. But have you ever wondered what the monthly instalment will be that you need to pay to service the loan?

For this, you need to compute your monthly equated monthly instalment (EMI) using a personal loan EMI calculator. Imagine that you want to raise a personal loan of ₹10 lakh at an annual interest of 12 per cent. Prior to raising a personal loan, you need to examine your repayment ability by using the personal loan calculator. Remember that this EMI calculator is used to ascertain the monthly instalment to be paid to service the loan. You can access the EMI calculator here. 

This EMI calculator requires three inputs: total loan, rate of interest and loan tenure.

Let us understand more about this

1. Loan tenure: The loan tenure generally varies between 12 and 60 months. When you repay the loan in one year, the tenure is 12 months and when the tenure is longer, it could stretch anywhere between 12 and 60 months, i.e., 1 to 5 years. 

It is noteworthy that the longer the loan tenure, the lower the loan EMI, and the shorter the loan tenure, the larger the monthly instalment.

2. Rate of interest: The interest rate could be anywhere between 10 and 16 per cent per annum. The loan EMI is directly proportional to the rate of interest. This means if the interest rate is high, the loan EMI would be large, and if the interest rate is lower, the EMI would be smaller too.

3. Amount of loan: The loan amount could be anywhere between ₹50,000 and ₹20 lakh. Some banks, meanwhile, offer larger loans for up to ₹40 lakh. Again, the amount of the loan directly impacts the EMI. This means the larger the loan amount, the bigger the EMI and the smaller the loan amount, the smaller the instalment.

Illustration: When you take out a personal loan of ₹5 lakh that charges an interest of 10 per cent and is to be repaid in 36 months, the EMI calculator will show that the monthly EMI is ₹16,133. The calculator also shows that the total interest across the duration of loan turns out to be ₹80,809.

As you raise the interest rate to 12 per cent, the EMI will increase proportionally to ₹16,607, reveals the EMI calculator. Likewise, when the loan tenure is decreased to 24 months, the EMI will increase to ₹23,536.