16 Jun 2024

# How to Calculate Personal Loan EMI?

Personal loans have a set maturity period and recurring payments known as EMIs (equivalent monthly installments) that must be made during the loan term. The EMI calculator is a tool that calculates your loan EMI based on certain key information such as the amount borrowed, the relevant interest rate, and the loan tenure.

You can use the EMI calculator to measure personal loan EMIs that fit into your budget at any time of the day and at an unlimited number of times.

## The Formula for Calculating Personal Loan EMIs

The personal loan EMI calculator uses the following formula:

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

Where,

EMI stands for equivalised monthly installments.

P denotes the loan principal, or the sum borrowed.

R = annual interest rate/12 = loan interest rate (monthly basis)

N= number of months it takes to repay a loan.

The formula mentioned above can be used to calculate EMIs for any kind of loan and not just personal loans.

Alternatively, you can use an Excel sheet to measure your loan EMI using the MS-Excel formula “PMT.”

The following is the full formula syntax for EMI calculation in Excel: PMT (rate, nper, PV)

Where,

rate = Personal loan interest rate (in percentage)

nper = Loan tenure in months i.e. number of EMIs payable

PV = Loan principal (present value)

If you use the online EMI calculator or the manual calculation formulas, the EMI calculation results will be the same. The online EMI calculator removes the need to perform a time-consuming calculation manually since the result is obtained instantly by entering the necessary details.

The table below shows the loan repayment schedule for a loan of Rs.1 lakh with a term of 5 years, an interest rate of 9% p.a., and a 2% processing charge.

Yearly Principal Interest Total Payment, and Total Balance

 2020: Rs.9,493 Rs.5,039 Rs.14,532 Rs.90,508 2021: Rs.17,473 Rs.7,437 Rs.24,910 Rs.73,034 2022: Rs.19,112 Rs.5,798 Rs.24,910 Rs.53,922 2023: Rs.20,905 Rs.4,005 Rs.24,910 Rs.33,016 2024: Rs.22,867 Rs.2,043 Rs.24,910 Rs.10,150

## Calculating the EMI on a Personal Loan

By simply entering the loan number, interest rate, and term, a personal loan EMI calculator will instantly calculate your EMIs.

For instance, the online HDFC personal loan calculator from HDFC Bank makes calculating your loan’s monthly payments easy. The personal loan calculator assists you in quickly calculating your payments and, as a result, better planning for your loan and repayment.

## How to Make EMI Payments on a Personal Loan?

The following are some of the most popular ways to pay your loan EMI:

Autopay: You can use internet banking to set up autopay for your EMI payments.

Standing Instructions: You can use the NACH mandate to create standing instructions (SI).

RTGS, NEFT, and IMPS payments are all options for paying your EMIs online.

Drafts or post-dated cheques are used to make EMI payments on your loan.

## Factors Affecting Your EMI on a Personal Loan

Loan Amount: The larger the loan, the higher the EMI will be.

The lender determines the maximum loan amount you can get based on your repayment ability, relationship with the bank, and other factors.

Interest Rate: In this circumstance, too, the interest rate is directly proportional to the EMI.The higher the interest rate, the more expensive your repayment. The bank calculates the interest rate on your loan based on several variables, including your salary, credit history, repayment ability, and so on.

Loan Tenure: The EMI is inversely proportional to the loan tenure you pick. The lower the EMI the longer the tenure.

However, if you borrow for a longer period, you can end up paying more in interest. The loan duration options usually vary from 12 to 84 months.

## Advantages of Using an EMI Calculator for a Personal Loan

### Examines the loans:

Enter a set of loan amounts and terms, then adjust the interest rate and processing fee based on the bank’s current rates. It will give you a general idea of the overall cost of your loan, and you can choose your loan based on that.

### Saves time:

Using a calculator saves a lot of time. Calculating EMI takes less than a minute. Furthermore, EMI calculators are simple to use and completely accurate.

### Select the length of time for your loan tenure:

Compare loan tenures and EMIs to determine which is best for your financial situation. Choose a shorter term if you are willing to pay a higher EMI and want to pay off your loan sooner.

### Verify EMI information:

Using an EMI calculator, you can confirm your repayment schedule as provided by the bank.

Aside from that, you can use a calculator to figure out the processing fee you’ll have to pay upfront (usually deducted from the sanctioned amount).

A personal loan allows you to borrow money for several purposes. You get the money in a lump sum after a short application and approval process. However, before you can enjoy such advantages, you must carefully consider how you can use your loan, find the right lenders, and negotiate the best price.

## Interest Rate Variations Over the Life of a Loan

Set, floating, or hybrid interest rates are available for loans.

In the case of a fixed interest rate loan, the interest rate remains constant over the term of the loan, and the loan repayment amount is fixed for the same term. Interest rates on floating interest rate loans will change frequently during the loan’s term. This move can have a positive, negative, or no effect on the loan EMI.

### To Sum Up

Safety and security are some of the core tenets of financial planning and borrowing a loan. Paying off personal loans with great insights will in return give you a good credit score, and better future openings for funds and financial assistance. We have covered the complete details of how a personal EMI is calculated, the working, making payments, advantages, factors that affect EMI on a personal loan, and interest rate variations. These attributes are the core to knowing everything around your personal loan.