EMI calculator is a financial tool available online for loan instalment estimation. Its use extends to the computation of a near-accurate EMI amount the borrower has to pay on the loan availed. The personal loan calculator works on the basic principle of interest calculation. Potential borrowers need to understand both - the calculator’s working as well as the formula on which it functions.
Formula to calculate EMI
The basic formula for calculation of EMI on advances like a personal loan is explained below –
E = P X R X (1 + R) ^n / [(1 + R) ^n-1]
In this given formula,
E stands for EMI,
P denotes the principal amount,
R is the rate of interest, and
n is the number of months as per the repayment tenor.
Uses of an EMI calculator
An instalment calculator can have quite a few applications. Check out its two primary uses below.
Comparing different loan offers: It is essential to compare different loan offers from various financial institutions to arrive at the most beneficial one. It can be done using an online calculator which offers near-accurate calculation of EMIs in an instant.
Choosing the right tenor: Online calculators also allow individuals to compare different tenors for the same loan amount. It enables them to select a convenient tenor so that they make affordable repayments and in time.
Though its use is simple, potential borrowers can learn how they can use a personal loan calculator to derive maximum utility. Usually, they can access it online, and input the interest, tenor and loan amount to find the EMI amount.