With loans, comes the EMIs. EMI or Equated Monthly Instalment is the fixed amount of payment which has to be paid by the borrower every month on a specified date to the lender. EMIs constitute the principal loan amount along with the interest charged.
The EMIs are calculated using the EMI calculator tool. Herein you enter the details of the loan amount to be borrowed, loan tenure, rate of interest charged and the processing fees. The EMI Calculator works on the formula as mentioned below:
E = P x r x (1+r)^n/((1+r)^n – 1)
- E: It stands for the EMI amount to be paid every month.
- P: It is the principal amount which you want to borrow.
- r: It is the applicable rate of interest computed every month and not annually. It is obtained by using the formula r = (annual interest/12) x 100.
- n: It is the loan tenure depicted in months.
Some banks also add processing fees in the calculation of monthly instalments.
Why is it Important to Use an EMI Calculator?
Whenever one takes a loan- be it secured or unsecured, the borrower is liable to repay the loan amount along with interest in a specified period called loan tenure. This is done through the EMIs which encompass the interest rate along with some pre-decided amount. The total cost of your loan is dependent on these monthly payments. Using the EMI calculator, you get a gist of the total cost of your loan divided into months. This helps you in creating a monthly budget keeping in mind your income and expenses.
Some key reasons on why one should calculate the EMI beforehand:
- Loan amount: Be very clear on what loan amount you want to borrow to meet out your financial emergencies. Borrow as much as you can repay comfortably. It is good to borrow only as much as you can repay. Based on your loan EMI calculation, choose the amount appropriately and try to maintain a low debt-to-income ratio to avoid any defaults.
- Loan tenure: Shorter the loan, higher the EMI payments and vice versa. A short loan tenure also means that the borrower will have to pay less as interest. Using the EMI Calculator, calculate EMIs for different loan tenures and choose the one which best suits you.
- Loan EMI: High debt to income ratio takes the borrower on the path of default. A loan is a long term commitment. Thus try to accommodate the EMI within your income only else things can go bad.
Manually calculating the loan EMI can incur errors. Thus it is advisable to calculate loan EMI using the online platform. EMI calculators give you instant and correct results of any type of loan scheme you wish to choose.
How to Use an EMI Calculator?
To keep the loan EMI payments comfortable on the pocket, the borrower can either adjust the loan amount or loan tenure or both to maintain the balance. The rate of interest and processing charges are not in the hands of the borrower and thus they cannot do anything about it. As experts advice, it is always better to compare various loan offers and lenders for their offerings before committing oneself to a loan. LoansJagat offers an excellent platform for the borrowers where they can calculate the loan EMI using their EMI Calculator. This gives them an estimate of how much loan amount they should take. They can also compare different lenders and check the EMIs that will cost them on account of the rate of interest and processing fees.
Components of an EMI Calculator
EMI Calculators gives information on three main aspects viz. the EMI, the breakup of the payments due and the amortisation table.
EMI Calculator gives you an estimate of the Equated Monthly Instalments which includes the payments of the principal amount and the applicable interest on the loan.
EMI Calculator also gives an estimate of the breakup of the entire amount which the borrower will pay to the lender. It includes the principal amount, interest amount and the processing charges.
It gives you a chart of how the loan will progress and how much debt you would have paid by the end of each year of the loan tenure. It also shows you a division of initial EMIs in terms of principal and interest.
Types of EMI calculator
Being highly specific like the loans, EMI calculators are of the following types:
- The home loan EMI Calculator
- The car loan EMI Calculator
- Personal loan EMI Calculator
- Business loan EMI Calculator
EMI Calculator in Excel
The borrower can also calculate the EMI in Excel provided they are through with the formula. However, the only drawback is that the borrower will have to input the interest rate after calculating the monthly rates. Also, EMI Calculator in Excel doesn’t include the processing fees as well.
The syntax for the excel function is:
PMT (rate, nper, pv)
pv = The principal amount or the present value
rate = The fixed rate of interest at which the loan is borrowed
nper = The number of payments to be made to repay the entire debt
LoansJagat EMI Calculator
LoansJagat EMI Calculator is a quick way of getting an estimate of the monthly installment that you will be liable to pay if you opt for the loan. Using their platform, it is easy to get all the aspects taken into account without any error. Their online EMI calculator calculates the EMIs on the loans free of cost so that you can take an informed and calculated decision about the loan.