# Use an online EMI calculator to plan your Personal Loan repayment better

While a personal loan can help you address emergencies and goals with ease, a personal loan calculator helps you ensure that your finances are secure. This is because an EMI calculator can help you plan repayment even before you apply for the loan, and even help you strategically make part-prepaymentsto become debt-free faster.

Since missing a personal loan EMI can bring down your CIBIL (or credit) score, repaying it on time is crucial. An online personal loan calculator makes it easier for you to choose an EMI that works with your income and financial commitments and even compare the effect of the personal loan interest rate on your EMI to make better decisions. Read on to know more about how an EMI calculator for personal loan works and how to best use it to boost your repayment planning.

How to use a personal loan calculator

An online personal loan calculator takes three components into account when computing your EMIs. These are:

• The personal loan interest rate
• Your chosen personal loan amount
• Your chosen tenor or repayment duration

Simply enter these figures into the calculator or use the sliders to compute your EMIs. A personal loan calculator works on the following formula:

E = P * r * (1+r) ^n / ((1+r) ^n-1) where E is EMI, P is the principal amount, r is the rate of interest calculated monthly, and n is the tenor.

While you can also do the calculation manually, multiple variations may lead to errors. Any lack of accuracy can thus affect your financial planning adversely.

What is shown on a personal loan calculator?

Apart from your EMI amount, the ideal personal loan calculator online also gives you information on the total interest payable on the loan as well as the total cost of borrowing, which is the total interest plus the total principal. This makes it easier for you to see the big picture regarding your loan. What’s more, some online calculators also reveal the EMI repayment schedule, so you can see the 2 components of your EMI, the interest and principal, clearly over your chosen tenor.

How to plan repayment using a personal loan calculator

To understand how to plan repayment using a personal loan calculator, consider the following example: Say you want to borrow a loan of 3 lakh for 3 years (36 months) and you’re getting a rate of 15% from one lender and a rate of 14% from another. According to the calculator, your EMI in the first case is 10,400 and in the second case is 10,261. Now see how a personal loan calculator helps you:

• Select the right lender

When you have different lenders offering their own personal loan interest rate to you, a personal loan calculator helps you see how even a small difference in rates can impact your EMIs. This helps you choose the right lender keeping affordability in mind.

• Select a budget-friendly EMI and loan amount

Your budget needs to make room for EMIs to ensure timely monthly payments. To do this, you will need to keep your fixed expenses such as rent, daily living experiences, other loan EMIs, and more in mind. If you see that the EMI of 10,261 is too much and can cause a financial strain during repayment, you can try choosing a lower loan amount, keeping all other variables the same. For instance, when you choose a loan of 2.50 lakh instead of 3 lakh for 36 months and the personal loan interest rate of 14%, your new EMI will be 8,550. Now see a personal loan calculator helps you make numerous tweaks like this.

• Select a suitable tenor

The tenor is also an important factor when it comes to repayment because while lengthy durations mean your EMI is lower, it also means that you pay more interest in total. For instance, if you take a personal loan of 3 lakh at 15% for 48 months rather than 36 months, your EMI will be 8,349 while for 60 months, your EMI will be 7,137. However, your total interest will be 1,00,770 in the first instance and 1,28,215 in the subsequent one. Knowing this effect of time on your EMIs, you can make a better decision about your EMIs using the personal loan calculator.

• Select the opportune time to make a part-prepayment

Making a part-prepayment helps you reduce your principal, which can in turn either reduce your subsequent EMIs or your loan tenor. You can plan for this when you receive your annual bonus if you’re expecting returns from investments, or other windfall gains. A personal loan calculator helps you plan this better, as you can see when making a prepayment during the tenor is most beneficial with the EMI repayment schedule.

Taking the initial example of a loan of 3 lakh at 14% for 3 years, you will notice that the principal component is higher at the beginning of repayment versus during the end. So, making a part prepayment of personal loan in the initial years, helps you save more on interest.

As you can see, a personal loan calculator is an invaluable tool that makes repayment planning stress-free, accurate and fast. Using it, you can ensure that your borrowing experience is free of surprises and doesn’t strain your finances or lead to a reduction in your credit score. To enjoy a transparent and affordable repayment on a personal loan apply with lenders like Bajaj Finserv, for a nominal personal loan interest rate and easy eligibility criteria. The Bajaj Finserv Personal Loan further offers up to 25 lakh with minimal requirement of documents. To get started and apply in 2 clicks, check your pre-approved offer today.