A Personal Loan is a useful debt instrument which is availed when the existing funds of an individual do not suffice to fulfill a particular need. Financial institutions like banks and Non-Banking Financial Companies (NBFCs) provide these loans at feasible rates of interest. They can be availed for a variety of reasons, such as- for travel, weddings, education, medical emergencies and purchase of any asset. These loans prevent savings from taking a hit by providing the required financial coverage whenever needed. Before availing one, a Personal Loan calculator should be used for better loan management.
A Personal Loan Calculator is used to calculate the Equated Monthly Instalment (EMI) for a particular loan amount to be borrowed against the specified rate of interest of a bank or NBFC.
The amount to be borrowed, i.e. the loan principal, the rate of interest, and the tenure of repayment collectively decide how much EMI is to be paid every month. Based on the affordability of the loan and the income and existing liabilities of the applicant, the most convenient EMI can be evaluated through various permutations and combinations of the three factors mentioned above.
Apart from the EMI calculator, there are Personal Loan eligibility calculators which are used to determine the maximum loan amount an individual is allowed to borrow. The user needs to fill in the details such as his/her age, monthly income, existing liabilities, and city of residence.
The EMI calculator and the eligibility calculator are available online for free use.
These tools are quite helpful in deciding how much an individual can borrow and how much of his/her monthly earnings will go towards repayment of the same.