# How to use Personal Loan Calculator for Calculating your EMIs

Personal Loan up to 8 times your Salary

• Minimum Salary 5000 AED
• EMI Tenure up to 48 Months
• Lowest Interest Rates

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A personal loan is referred to as a multi-purpose loan that you can borrow for meeting your immediate requirements. Do you need money for planning a trip or for fixing your car? Do you want to get your house renovated?

In this case, a personal loan will be a reliable tool for sourcing some money. Since this loan is an unsecured one, the rate of interest on the personal loan is usually higher as opposed to a home loan or car loan. Therefore, you must know your finances properly in advance.

A personal loan calculator is a type of instrument that helps you in calculating the future installments monthly assigned for making repayment of the personal loan.

Using personal loan calculator, you will be able to estimate your EMIs in the future. All this will assist you in budgeting the future finances & help you in making a responsible decision.

## Formula to Calculate your Personal Loan EMI

The following is the mathematical formula to calculate your loan EMI-

EMI= [P x (R/100) x {1+ (R/100)} ^N] / [{1+ (R/100)} ^ (N-1)]

In which,

P: principal amount of the loan, that is, the borrowed amount

R: rate of interest on the loan (on monthly basis), which is equal to the annual rate of interest divided by 12

N: tenure of the loan in months

EMI: equal monthly installments

The formula above lets you calculate all kinds of loan EMIs and is not restricted to personal loans simply. With the EMI calculator being available online, you no longer need to do this complex calculation manually because you can obtain the results instantly by entering the data required.

This is a common knowledge that the EMI to be paid is dependent on your loan amount, rate of interest, and the loan tenure.

## Calculating the EMI using the Reducing Balance v/s Flat Balance Interest Calculating Method

As we have discussed in the sections above, the principal amount on the loan is amongst the key factors depending on which the personal loan EMI varies. In case the calculation of the EMI is done with the flat balance method, the interest amount to be paid on the personal loan will be calculated on the complete amount of loan across the whole loan term. Therefore, the EMI will remain the same throughout the entire tenure of the loan.

On the contrary, in case you are using the reducing balance rate of interest method for calculating the EMI on your personal loan, the interest amount is calculated on the outstanding principal for every successive month rather than the whole borrowed amount. Consequently, the principal amount used for calculating the interest reduces with time, leading to a reduction in the successive loan installment as the tenure for repayment progresses. These days, most of the banks offer loans using the reducing balance rate of interest calculating method.

## Using this Personal Loan Calculator

The personal loan EMI calculator gives results within seconds and allows you to understand if the calculated monthly installment will be affordable for you or not. All you need to do is enter the following details in the online calculator.

1. Loan amount of personal loan (in dirhams)
2. Rate of interest on the personal loan (in percentage)
3. Tenure of the loan (usually in months)

You can enter the values of the loan in the calculator. As & when you change the values you have entered, the loan calculator will calculate the values and again and show the new results.

This calculator not only shows the EMI results; but also tells you the entire amount of interest payable on the loan across the loan term. You can also view the break-up of the entire payment of the principal and interest amount. Therefore, the personal loan calculator in this way will also assist you in planning your cash outflow for the future. Moreover, it will give you a better picture of the maximum amount of loan you will be able to afford.

## What are the Factors that Affect your EMIs?

The following are the main factors that affect your EMI amount overall.

### 1. Principal Amount of the Loan

Consider it to be a thumb rule, the higher the amount you borrow in the form of a personal loan, the higher would be your monthly installments till the rate of interest and tenure are constant.

### 2. Loan Tenure

If you opt for a longer loan tenure, the individual EMI amount will reduce as opposed to the amount in case of a shorter loan tenure for that same loan. However, a longer tenure will also result in a higher amount of total interest to be paid during the loan term.

### 3. Rate of Interest

The higher your rate of interest, the higher would be the individual monthly installment payout along with the total amount of interest payable against your personal loan.

The above-mentioned features of the personal loan, specifically the principal amount and the rate of interest may vary for different applicants. The main applicant-specific factors, which have an impact on personal loans are as follows.

• Income
• Credit mix which is the ratio between secured and unsecured credit
• Outstanding debts
• Credit history or credit Score

## Benefits of a Personal Loan Calculator

Listed below are some of the benefits of using this loan calculator.

### 1. Saving time

It takes not even a minute to calculate your EMI while using a loan calculator. Moreover, these EMI calculators are very simple to use and are 100% accurate.

### 2. Comparing different loan options

You can enter a fixed amount of loan and tenure and change the rate of interest and processing charges based on the rates that are fixed by the bank concerned. This will provide you a holistic idea about the entire charges of the loan and depending on this you can select the personal loan option.

### 3. Selecting the preferable tenure of the loan

Consider different tenures and compare the EMI to understand which one is more suitable for your budget and financial health. In case you do not mind making payment of higher EMI amounts and would prefer to close the loan early, you can opt for a shorter loan term. Otherwise, you can go for the option of a longer tenure.

### 4. Verifying the information regarding EMI

The repayment schedule offered by the concerned bank can be validated by the bank using the personal loan calculator. Apart from this, using a calculator you can calculate the processing charge also, which you has to be paid upfront (generally deducted from the amount sanctioned).

### Checking the repayment schedule

This EMI calculator also provides you with a complete break-up of the repayment schedule. This way you will have an idea of the amount you will have to pay in the form of outstanding principal as well as interest.