Almost everyone has heard about various types of loans that an individual can avail as per his or her requirement. Once the loan amount is disbursed, the loan applicant has to repay it back in equated monthly instalments aka EMIs. For the uninitiated, a loan EMI is a specific amount that the borrower has to pay back to the lender every month at a specific date. Before availing any sort of loan, you need to calculate the EMI so that you are aware of the repaying capacity before the loan is disbursed.
Primarily an EMI depends on the following factors-
- Principal Amount
- Rate of Interest
- Time Period of Loan
How to Calculate EMI Easily?
With the help of handy tools like MoneyTap’s EMI calculator, you can easily calculate the EMIs on a monthly basis. Companies like MoneyTap have a very simple formula which is used to calculate the EMI. But before calculating the same, you must understand the details that are required to calculate the same.
Principal Loan Amount – The entire money sanctioned at the time of loan disbursal is the practically the loan amount.
The rate of Interest – Interest rate is the extra charge levied on the principal amount which is to be paid off during the loan tenure. Depending on the type of loan availed it can either be fixed or floating, and the EMIs vary on the basis of that.
Tenure Period – This is supposedly the time period chosen by the loan applicant to repay the loan. Almost all financial institutions have a tenure which suits the applicant’s requirement. Hence, they are able to choose the tenure as per their repayment capacity. Usually, the tenure lasts between 1-5years.
Based on the above-mentioned details, the EMI is calculated easily using the formula below.
EMI = [P x R x (1+R) ^N]/[(1+R) ^N-1],
Where
- P is the Principal Amount.
- R stands for interest rate charged every month.
- N is the total no. of monthly instalments.
It is always recommended to use an EMI Calculator for calculating your loan, as it is very handy. It gives you accurate results and helps you plan your monthly expenses on the basis of the loan disbursed. Hence, it allows you to take an informed decision pretty easily.
So, what are you waiting for? You can now avail the best loan offers and use EMI calculator in a jiffy. Applying for a loan and paying it on time also improves your credit score quickly.
