In the world of banking and finance, one term you shall often come across is ‘Equated Monthly Installment,’ or ‘EMI.’ An EMI includes a part of the principal amount along with the loan interest, which needs to be repaid every month until the loan is fully liquidated. When applying for a personal loan, calculating the EMI beforehand is pivotal to better manage your financial obligations. You can use a PL Loan EMI Calculator or follow some simple steps to calculate EMI for a personal loan.
The keywords to remember here are the PL loan EMI calculator, a handy tool designed to simplify the process of EMI calculation for personal loans. In this article, we’ll bring to your attention the six simple steps for loan calculation manually, even though there is the option to use an automated online calculator like the PL loan EMI calculator.
Step 1: Understand the EMI formula
The most widely used formula for EMI calculation is [P x R x (1+R)^N]/[(1+R)^N-1]. Here, ‘P’ stands for the principal or loan amount, ‘R’ is the monthly interest rate, and ‘N’ is the loan tenure in months.
You have to break down the annual interest rate to a monthly one (R) by dividing it by 12 and convert the tenure (N) from years to months. Remember, financial institutions express interest as an annual figure (in percent).
Step 2: Gather information about your loan
Before calculating EMI, ensure you have all the necessary details about your loan – the principal amount, the loan tenure, and the rate of interest. You can get these details from your loan documents or the financial institution’s website.
Step 3: Plugging in the details
Once you have gathered the information, you plug it into the EMI formula. For example, if you are planning a loan of Rs. 5 lakhs for a tenure of 5 years at an interest rate of 12 percent per annum, your ‘P’ is 5 lakhs, ‘R’ is (12 / 12) / 100 = 0.01, and ‘N’ is 5*12 = 60 months.
Step 4: Perform the calculation
By using the formula and plugging in these values, you will get your EMI. Continuing with the previous example, the calculation would be [500000 x 0.01 x (1+0.01)^60] / [(1+0.01)^60 – 1]. This calculation yields an EMI of approximately Rs.11,122.
Step 5: Use the PL loan EMI calculator
If you find the manual calculation complex or time-consuming, you can use an automated tool like the PL loan EMI calculator. You just need to enter the loan amount, the tenure, and the interest rate, and the calculator will provide you with the EMI figure. Besides, it offers a more accurate result than manual calculations.
Step 6: Plan your finances
Now that you have your EMI, you can plan your finances accordingly using the Bajaj Finserv App. Ensure your EMI doesn’t exceed 50% of your net monthly income. If it does, it may be worth considering reducing the loan amount or extending the loan tenure.
To sum up, the aforementioned simple steps for loan calculation can help in how to calculate EMI for a personal loan. These steps offer a clear picture of your repayments, helping you make informed decisions about your loan and avoid any financial stress in the future. However, do note the EMI value calculated manually might have minor discrepancies due to rounding off figures. For a more precise and convenient calculation, resorting to a PL loan EMI calculator is advised.
Understanding the calculation behind your monthly installments can aid you to better manage your personal finances. It helps in setting realistic financial goals and planning a budget, that aligns with your income and lifestyle. So, the next time you opt for a personal loan, remember to calculate your EMI with these simple steps or a PL loan EMI calculator.
