Due to the growing urge for people to buy expensive goods, dependency on personal loans has increased. This has eventually brought up a new term called EMI, which is generally applied in the process of loan return. People should confirm their EMI before borrowing because it will have an immediate influence on the way one lives within the length of the loan.

Therefore, it is always preferred that you check the EMI of your loan with an EMI calculator. This not only checks the amount of your monthly payments but also assists in various other ways. In this article, we will understand what EMI is, along with the user guide and the benefits of the EMI calculator.

Overview of EMI and EMI Calculator

A fixed payment amount, made by a borrower to a lender at a predetermined date each calendar month, is an equivalent monthly installment, or EMI. Equated monthly installments are applied each month to principal and interest, allowing the loan to be fully paid off over a certain number of years.

The EMI Calculator is an online tool that helps you calculate the EMI of your loan.  Just like a tax calculator enables you to estimate your tax liability, the EMI calculator lets you plan your loan repayments. It is an easy-to-use tool that computes EMI by using the following components:

• The loan amount is the total money borrowed from the lender.

• The interest rate is referred to as a fixed or variable annual percentage rate charged on the sum of money borrowed (the loan amount).

• Loan tenure is the period over which a loan must be repaid. Tenure is typically given in months or years.

Moreover, the EMI is affected by the following factors:

• Type of loan taken: The EMI structure varies depending on the kind of loan. For example, the EMI structure of a home loan may be different from that of a personal loan or a car loan.

• Prepayment and foreclosure: Some loans reduce the interest rate and shorten the tenure for prepayment and foreclosure.

• Processing fee: A higher processing fee can increase the loan amount, increasing the amount of EMI.

How to Use an EMI Calculator?

Using an EMI calculator is extremely easy and can be done in three steps only:

• Selecting the amount of the loan: The first and most crucial step would be choosing the amount of the loan. Fill in the amount you require for your ventures.

• Setting the rate of interest: The next step involves entering the interest rate that the lender can charge.

• Deciding the loan tenure: The last step is deciding how many years you need to pay back the loan amount.

And that’s it. The EMI calculator will provide you with the loan’s monthly installment amount.

Benefits of an EMI Calculator

The following are the benefits of using an EMI calculator for assessing the monthly installments of loans:

•  Helps in financial planning: EMI calculators help in financial planning by providing accurate estimations of installment obligations and helping you select the financially feasible loan.

• Time-saving: EMI calculators save time by avoiding consulting banking or other financial institutions. This can save professionals a lot of physical visits and consulting.

• Easy accessibility: EMI calculators are user-friendly and can be accessed online through smartphones. This makes it convenient for users to make quick calculations.

• Loans can be compared: You can compare the plans of different lenders by calculating your EMIs using an EMI calculator.

Does Credit Score Impact EMI?

Yes, it can significantly affect the amount you pay on EMI. The lenders will verify your creditworthiness before sanctioning and approving the loan. If your credit score is high, the lenders will trust you with a large amount of money in loans and lower interest rates for the desired amount.

On the contrary, if you have a low score, they charge high interest to balance the prospective losses. Therefore, maintaining betterment with a good score of 750 and above will keep you entitled to low EMIs and easy terms for loans. As a suggestion, we recommend you ACKO EMI calculator, that helps you manage your finances effectively. With just easy steps, you simply manage to get yourself educated on your loan planning.