Almost everyone needs to take a loan at some point in their lives. Although, in most cases, it is an urgent requirement, there are certain factors that should never be overlooked if you want to take a loan. The monthly payment amount is one such aspect that plays a crucial role. This is where an EMI calculator comes to aid. With an EMI calculator, you can find the best loan deals tailored to your needs.
What is EMI?
First of all, it would be best to clarify what EMI is. An equated monthly instalment ( EMI ) is the amount of money the borrower pays to the lender so that their loan can be paid off. It is a fixed amount that is decided when the loan is given. As the borrower pays the EMIs, they pay off both the interest and the principal sum.
What are the Benefits of an EMI Calculator?
Using an EMI calculator is advantageous for a number of reasons. Firstly, it is a very speedy process. You can give your loan amount, interest rate, and tenure and see the results immediately. This means that you have no downtime and can make decisions rapidly. Secondly, you can compare different loan offers with an EMI calculator.
You can adjust the interest rate, the loan amount, and the tenure to see which option is the most cost-effective. Finally, it can be a useful tool for finance planning purposes. You can play around with different scenarios and get a sense of your monthly payments and your overall liability. If you know your EMI beforehand, you can determine whether you will be able to afford the acquired loan within your monthly budget.
This will not only help you prevent financial distress but also not allow you to overburden yourself. An EMI calculator not only shows the applicable EMI but also the total amount that you will have to pay over a specified tenure in the form of interest. This provides you with an opportunity to make a comparison and decide whether you should take the loan or not.
How to Use an EMI Calculator
Using an EMI calculator is very simple. Here are the steps that you will have to follow:
1. Gather Information
The information you will require is:
- Principal Loan Amount: This is the total amount that you would like to borrow.
- Interest Rate: This is the rate at which the lender offers you the money to be paid on a monthly basis, which is the most common method of repayment. To use an EMI calculator, you will be required to convert the annual rate into the monthly rate.
- Loan Tenure: This is the period for which you would like to take a loan. It is provided either in months or years.
2. Input Your Information
Once you have gathered your information, you need to input it into the EMI calculator.
3. Analyse the Output
Once you input your information, the calculator will generate the EMI, total payment, and the total interest payable. Analyse the results. If the EMI that is generated is more than your expectation, you should either try to reduce the loan amount or increase the tenure.
4. Compare Different Scenarios
Use the tax calculator to compare loans. Try different amounts, interest rates, or tenures.
Conclusion
An EMI Calculator is a must-have for anyone who plans to take out a loan. It takes a couple of seconds to estimate the loan cost and calculate the EMI. The tool allows you to plan your expenses and estimate the affordability of the loan.
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