Personal loans are unsecured debts offered by banks and Non-Banks. personal loan interest rates generally lie between 12-27%, being different for different lenders. The higher rate of interest is due to the unsecured nature of these loans. Since there is no security/mortgage/collateral involved for these loans, lenders consider the credit scores of applicants as the primary eligibility criteria. With a high credit score, an individual can get an approved low interest personal loan. know how to check credit score.
Repayment of personal loans through Equated Monthly Installments (EMI) is decided through the formula-
EMI = P x r x (1 + r)n / ((1 + r)n - 1)
P = Principal
r= Interest rate per month
n =Tenure in months
The EMI is simply a method of quantifying the monthly financial liability associated with a personal loan or any other loan for that matter. With a shorter tenure, your monthly EMI increases in value whereas with a longer tenure, the payable EMI becomes lesser.
EMI can be calculated using a Personal Loan EMI calculator available online or a Microsoft Excel Spreadsheet. The user will have to fill in the correct values of the parameters namely, loan principal, tenure and interest rate.
Using personal loan calculator, an individual gets an idea of the loan liability and the EMI. This helps in drawing up a monthly budget for better financial planning.