Simple Calculations For Determining EMI


What is EMI?

EMI, which stands for Equated Monthly Instalments, are used for repayment of a loan over a given duration of time. EMIs are comprised of two components – the principal amount and the interest amount. The former is equivalent to the amount borrowed via loan, and the latter is the additional payment required to be made on top of the principal amount.

EMIs are simple and flexible means of paying back on loans. They allow one to make heavy purchases without boring a hole in their finances. Easy repayment options enable the borrower to repay the amount comfortably over a period of time without worrying about budgeting for their other expenditures. On the whole, it is a preferred means of payment compared to down payments.

EMIs on Personal Loans

Personal loans are a great tool to meet your requirements, whether they are for higher education, home renovation, vehicle purchase or even wedding expenditure. Without giving collateral, you can avail loans within 24 hours to meet your requirements.

How are EMIs calculated?

EMIs are calculated in two manners – flat interest rate, or reducing balance interest rate.

Flat Interest Rate

For the flat interest rate method, the interest is calculated based on the initial loan amount that was taken. The same interest rate is applicable for the entirety of the loan tenure. Therefore, the interest is the same for all the months. This method of calculating EMI is typically applied for car loan EMI calculators.

In order to calculate the flat interest rate, the following formula is applied:

EMI = (Principal amount + interest rate)/Time period(months)

Reducing Balance Interest Rate

This method of calculating is different from the former, in that here, the interest rate is calculated on the outstanding balance of the loan that was initially availed. Therefore, the interest amount to be paid varies over the months.

The formula for calculating EMI for this method is as follows:

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

P= Principal Loan Amount

R= Rate of Interest (monthly basis)

N=Tenure of loan (calculated in months)

The Loan EMI Calculator:

You already know how to compute the EMI amount manually, through each of the two methods – the flat interest rate and the reducing balance interest rate. However, calculating by hand can make things tedious, and cumbersome. Moreover, mistakes in calculations will give you incorrect values for the amount that needs to be repaid.

Thus, it is always wise to use the personal loan EMI calculator to determine the monthly loan EMI pay-outs. All you have to do is enter the required variables of the loan, like the interest rate, the principal amount, and tenure, based on which you will get the required EMI. This way, you will have an accurate answer within seconds.

What’s more, the personal loan EMI calculator is available at any point of time, and is offered without any charges. This is also very useful when you are considering availing a loan and need to compare various EMI rates to see which one suits your budgetary needs the best.

Advantages of using an EMI Calculator:

There are several benefits of using a personal loan EMI calculator to determine the EMI payment. Some of them are as follows:

  • These calculators are really accessible, and easy to use. Moreover, they are offered free of charge, meaning anyone can use it at any point to determine their loan repayment schedule. For online EMI calculators, you simply have to use your device to access it.
  • Doing the calculations on paper can be tedious and time-consuming. Moreover, you are likely to make errors that will lead to incorrect solutions. With an online personal loan EMI calculator, that is no longer a worry, since the calculation will already be done by the computer, giving you an accurate value of the EMI.

These are the ways in which the personal loan calculators work, and are useful in determining the amount to be paid on a monthly basis. Now that you know how to use your personal loan EMI calculator, you can get started yourself by comparing different loans and their respective EMI requirements. The personal loan calculator will give you accurate numbers, allowing you to determine the best possible deal for you!

You can use the Finserv MARKETS EMI personal loan EMI Calculator to determine your monthly EMI installments. On Finserv MARKETS, flexible repayment tenures from 12-60 months are available, based on your needs. The personal loan on Finserv MARKETS also comes with several other benefits such as minimum documentation, high loan amounts, competitive rates and much more. Opting for Bajaj Finserv Personal Loans on Finserv MARKETS is a sure-shot way of fulfilling your goals and those of your loved ones.