Personal loans can help you take care of your various expenses like an abroad vacation, higher education or wedding. This post explains what a loan calculator is and how it can help you with financial planning.
Personal loans are available instantly because financial institutions can disburse them within hours. They can be used to serve several purposes, including buying a vehicle or paying off other high-interest debts. Loan calculators can help you be informed of important details that can help you plan your repayment.
Explaining Loan Calculator
A loan calculator for personal loans is an online tool available in the portals of all leading banks and NBFCs. There are two types of loan calculators widely used by the borrowers. They are
- Personal Loan Eligibility Calculator
Financial institutions can give out personal loans of up to 25 lakhs usually. This calculator helps you get an estimate of the amount you can expect to borrow if you meet the basic eligibility criteria like age and monthly income.
Salaried professionals can enter the following details to calculate the loan amount they are eligible for
- Name of Company
- Monthly income
- Other monthly EMIs
Some eligibility calculator can also allow you to upload required documents and get immediate loan approval.
- Personal Loan EMI Calculator
As the name suggests, this calculator lets you learn the amount of EMI you will be expected to pay on approval of the loan. You have to input the following details to calculate your EMI
- The loan amount you intend to borrow
- Tenure for repayment of the loan
- Interest rate
Once you enter these values, the calculator gives the EMI amount you need to pay. The EMI includes both principal and interest and is generally preferred to be less than 65% of your monthly income.
Benefits of Loan Calculators
Loan calculators help a great deal when you take personal loans by helping you calculate your monthly outgo towards repayment. Here are some of the benefits of such calculators
- Determine Affordability of EMI: It is advisable to calculate your other monthly expenses to see if you can pay the monthly EMI comfortably. You also have to consider unforeseen expenses when checking whether you can afford to put aside a certain amount of money to pay the EMIs.
- Choose Appropriate Tenure: Personal loans can usually have a tenure of 12 to 60 months. By entering the loan amount, you require and the interest rate offered by the financial institutions, you can alter the tenure in the calculator to see how it affects your EMIs. If you are hopeful about having spare money during the latter part of the tenure, you can also choose to prepay your loan. Most financial institutions offer full or partial prepayment options. Keep this in mind while selecting a suitable tenure.
- Learn About Payable Interest: A Personal Loan Calculator can give you details of the interest payable for a certain principal amount over a specified tenure. Since no collateral is required for personal loans by most finance companies, the interest rates offered can largely depend on your credit score amongst other factors. You can try bringing down the interest rate and the resultant payable interest by taking measures like adding a co-applicant with a better credit score.
Loan calculators provide a systematic way to plan your finances without having to guess about probable EMIs and loan eligibility. Using these calculators help you effectively manage your expenses and repay the loan without defaulting.