One significant challenge when planning to borrow is deciding on loan tenure. Indeed, choosing the perfect tenure determines whether the monthly payments will be in your range or not. Additionally, what interest are you going to pay finally? In such a case, an EMI calculator is the best solution. It is a very simple tool, but also a very strong one that lets you know your installment amounts even before you make the decision to take a loan.
What is an EMI calculator?
A simple task for an EMI calculator is to find out the amount of Equated Monthly Instalments (EMIs) based on some data. The only required data are:
- Loan amount
- Interest rate
- Loan tenure
After entering this data, the calculator will compute the EMI, which is the amount that you have to pay monthly. For example, if one desires to get the sum of Rs. 5 lakh for 3 years at 12% interest the calculator will provide the monthly EMI amount. Now, you can know whether the repayment is affordable to you just like that.
Why is it important to use an EMI calculator?
Getting a loan without knowing how you are going to pay it back is quite risky. An EMI calculator allows you to:
- Avoid surprises in monthly outflow
- Compare different loan tenures easily
- Plan your budget better
- Make informed borrowing decisions
Moreover, this tool saves you the stress of calculating manually. At the same time, it gives you a complete idea of the amount you need to set aside every month.
Choosing between short and long tenure
An EMI calculator means a lot when you are looking at the differences between short and long repayment periods.
- Short tenure: Higher EMI payments but less interest outgo total.
- Long tenure: Lower EMI but higher interest given over time.
Let’s assume you want to take a Rs 4 lakh loan at 11% for 2 years, then your E.M.I might be around Rs. 18,700. If you took the same loan for 5 years, the E.M.I would have been Rs. 8,700 only but you would have paid a lot of interest that way.
You can check these kinds of situations with the help of the calculator. So that you can find the perfect combination of affordability and savings.
Example: Rs. 10 lakh personal loan
Suppose you want to borrow a Rs. 10 lakh personal loan. Without the help of a calculator, it would be pretty much impossible to tell how much you have to pay each month. But if the EMI calculator, can help you with counting various options:
For example:
- At 10% interest for 3 years → EMI is around Rs. 32,300
- At 10% interest for 5 years → EMI is around Rs. 21,200
- At 10% interest for 7 years → EMI is around Rs. 16,600
This way, you can analyze and figure out if you can afford the shorter tenure to save on interest or if the longer one fits better into your monthly budget.
Benefits of using an EMI calculator
Before you get a personal loan, make sure to use this tool at least once. Here is the reason it is a must-have tool:
- Accuracy: No manual errors, only precise numbers.
- Time-saving: Instant results within seconds.
- Convenience: Available online anytime.
- Flexibility: Lets you compare multiple loan scenarios before making a decision.
Basically, you will take a loan only when you can comfortably repay.
Final thoughts
An EMI calculator should not be seen as just a tool to manage the repayment of loans, but rather as your financial guide. It will let you try out various loans and repayment periods till the one that best suits your way of life and overall budget. No matter if you are going to borrow a small amount of money or a big one like a Rs. 10 lakh personal loan, first check if the tenure you get is well-informed, practical, and stress-free or not.
The good thing about borrowing with an EMI calculator is that you get to enjoy all the benefits of a personal loan and keep the finance decision based on your preference and ability.
