When it comes to making smart borrowing decisions, a personal loan calculator is a handy tool. It helps you consider the impact of the important loan factors such as the interest rate, tenor, and the loan amount.
These particulars of your personal loan will affect the cost of borrowing and the affordability of the loan. A personal loan calculator helps you consider these more meaningfully when optimising your loan.
Besides loan planning, a personal loan calculator can also help you find the best loan in the market. This is because it is free to use, and so, you can compare offers within seconds. However, to use this tool optimally, there are a few things to keep in mind.
Read on to learn more about the personal loan calculator and the things to note when using one.
What Is A Personal Loan Calculator?
Also known as a personal loan EMI calculator, it is a digital tool that simplifies important loan calculations. With it, you can calculate the value of your EMIs and the interest component payable on a loan.
You can find this tool on most leading lender websites or dedicated personal loan calculator pages. The results you get with a personal loan calculator are accurate and do not require you to do any manual calculations.
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Information Required To Use A Personal Loan Calculator
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Loan Amount
Also known as the principal amount, this is a key element needed to calculate EMIs. So, when using a personal loan calculator, input the sanction that you are looking to borrow.
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Loan Tenor
The tenor is the repayment timeline for the loan. Generally, it ranges from one to five years. When entering this value into the personal loan calculator, some tools may require you to enter it in months.
Pay attention to the units of the calculator, as entering the wrong value for the tenor will result in errors.
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Interest Rate
This is the interest rate applicable on the loan. It will vary for each lender, and for calculation purposes you may use the advertised rate. You will find this information on the lender’s website.
How To Use A Personal Loan Calculator
Today, many banks, NBFCs, and lending institutions offer access to a personal loan calculator for free. While the interface and layout for these tools may differ, follow these general steps to use the tool with ease.
- Step 1: Visit the personal loan calculator page
- Step 2: Input the values for the loan terms
- Step 3: Check your inputs and ensure that you have considered the right units
- Step 4: Click on the ‘Calculate EMIs’ or check to see if the results are displayed below
Some tools may display the results instantly without requiring any other inputs. In some cases, you may even have a slider function, so ensure to set it accurately before computing results.
How To Assess The Results Of The Personal Loan Calculator
Knowing how to assess the results of the EMI calculator is crucial. It helps with planning and when making any decisions regarding the loan. Generally, the results are displayed in a tabular format.
Some tools may have a visual representation such as a graph. If this is the case, the graph will contain the total amount repayable. The graph may also have the principal and interest component listed.
The simplest way to assess the results is to note the total interest payable and the total loan amount payable. The interest value will dictate the cost of the loan, where the total loan is the final value payable over the course of the tenor.
In some instances, the personal loan calculator will grant access to the amortisation schedule. This is a detailed break up of each EMI and the outstanding balance after each monthly payment.
How To Optimise Your Loan With A Personal Loan Calculator
A personal loan calculator provides insights about numerous factors. This includes your total repayment, cost of borrowing, and an estimate of monthly repayment amount. This further helps optimise your loan in various ways such as:
- Finding the best tenor and planning your monthly budget accordingly
- Planning prepayment and foreclosure with the amortisation schedule
- Comparing offers to get the best and most affordable deal
Above all, the personal loan calculator saves time and minimises errors. These benefits are crucial when it comes to any loan calculations. You need quick and accurate information to make borrowing decisions. Best of all, you can access it any time, and all you need is your smartphone.
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