A loan for a home, car, or personal needs is a big financial decision. Knowing how much you’ll need to repay every month is important to avoid stress later.
An EMI calculator helps you do that easily. It shows your monthly payment based on the loan amount, interest rate, and repayment period, so you can plan better and choose the right loan. Here are five simple ways to use an EMI calculator for smart loan planning.
1. Verify Loan Affordability Before Applying
Before you start your personal loan application, knowing how much you can easily borrow is essential. An EMI calculator assists you with this. Simply put the loan amount, interest rate, and repayment period into the calculator. It will immediately display your approximate monthly EMI.
Compare this EMI with your monthly expenses and income. If the EMI seems acceptable according to your finances and leaves you with sufficient savings even after EMI payment, you can proceed with applying for the loan. If unacceptable, lower the loan amount or opt for a longer tenure.
2. Compare Loan Offers to Select the Best One
When considering a personal loan application, you will find that varying banks or lenders can quote varying interest rates and repayment tenures. It can get confusing if you try to figure out the best plan without an EMI calculator’s help. You can just plug in the details of every offer into an EMI calculator to determine the monthly EMI and total interest paid for every loan.
This enables you to compare all your alternatives quickly and clearly. You can select the most affordable loan, whether with the lowest EMI or the lowest overall price—whatever works best for you.
The main advantage is that you can select the best value deal through an EMI comparison of loans and save money in the long run.
3. Plan the Loan Tenure Smartly
The loan tenure is the duration for which you repay the loan. Naturally, this greatly affects your EMI and the interest paid. A longer tenure keeps your monthly EMI low, but raises the total interest paid. A shorter tenure results in higher EMIs, but lower overall interest.
An EMI calculator helps you experiment with different tenure options to determine what best suits your finances. You can easily find an optimal balance between monthly instalments and overall interest.
4. Know the Advantages of Prepayment of the Loan
Sometimes, people want to repay a loan earlier than planned—either a part of it or the full amount. This is called prepayment. It helps reduce the overall loan amount and saves money on interest.
Certain EMI calculators enable you to verify how a prepayment done after a few years or months will impact your EMI or loan duration. You can experiment with various prepayment possibilities to determine how much you can save and manage your finances better.
5. View the Breakdown of Your EMI Payments
Some EMI calculators display a detailed chart known as an amortisation schedule. This illustrates how much of each EMI is applied towards repaying the loan amount (principal) and how much is used to pay interest.
It lets you see how your loan balance decreases each month and how much interest you pay in the long run.
This data provides a clear picture of how your loan is being repaid. It can assist you in planning and making intelligent financial choices.
Conclusion
Always verify your EMI while considering a personal loan application. An EMI calculator assists you in better planning, comparing offers, and keeping financial tension at bay. It clearly indicates your monthly payments, keeping you in charge of your budget—whether the loan is large or small.
Laila Azzahra is a professional writer and blogger that loves to write about technology, business, entertainment, science, and health.