Applying for a personal loan has now become a hassle-free task in today’s world. You just need to prepare all the necessary documents and you are ready to apply for a personal loan. However, you should still look out for the bank’s interest rate that is being charged on the loan. Also, you can take the Frequent Finance Equity Release. Along with the rate of interest, the processing fees are also something that needs to be looked upon.
Now that you are familiar with the interest rate that would be charged by the bank along with the bank’s loan processing fee, you can head over to the bank’s official website to access the personal loan EMI calculator. Once you know the interest rate that the bank would charge on your personal loan application you can further calculate your EMI using the bank’s personal loan EMI calculator.
How to Use the EMI Calculator online?
Head over to the bank’s official website and look out for the EMI calculator. To calculate your EMI you just need to enter your loan amount along with the interest rate and the loan tenure in the EMI calculator. The calculator will then calculate the EMI amount and display it instantly. Knowing your EMI amount well in advance will help you in better financial planning and you would be able to manage your finances properly.
The banks generally use the reducing balance method to calculate the EMI amount applicable on the loan. However, it is a good idea to consult your bank or lender in advance for better information. The method of calculating the EMI adopted by the bank can also affect the EMI amount. There are mainly two ways used by the banks or lenders to determine the EMI amount. The flat balance method of interest calculation calculates the interest on the whole principal loan amount throughout the loan tenure. Therefore, the EMI remains unchanged during the entire loan tenure. The reducing balance method, on the other hand, involves computing interest only on the outstanding principal loan amount for each successive month instead of the whole of the loan amount. As a result, the principal amount decreases over time thus resulting in a decrease in the EMI amount as the loan tenure progresses. Most of the banks today prefer the reducing balance interest calculation method. Therefore, the majority of the EMI calculators use the reducing balance interest calculation method to calculate the interest as well as the EMI on the personal loan.
Factors That Affect Your Personal Loan EMI
The major factors that might have an impact on your personal loan EMI are as follows:
- Loan Amount- The higher the loan amount, the higher your EMI amount assuming the rate of interest along with the loan tenure remains constant.
- Rate of interest- The higher the rate of interest charged by the bank on your personal loan application, the higher would be your EMI as well as the total interest amount payable on your personal loan.
- Loan Tenure- A shorter personal loan tenure would result in high EMI amounts and vice versa. But a longer loan tenure on the other hand would also result in the total interest payable amount being higher when compared to the shorter loan tenure.
The above mentioned are the key factors that might affect your EMI amount when you apply for a personal loan.