Paying off all loans is an important part of all loan process. A personal loan is thus no exception to loan repayment, and it is to be paid out through personal loan EMIs. A personal loan EMI is a monthly instalment that a borrower needs to pay to reduce his loan liability over the chosen tenure. However, not many are aware of what constitutes a personal loan EMI and how it is calculated.
Also Read: How Is Personal Loan EMI Calculated
A personal loan is based on three loan components, which are, the loan amount borrowed by the borrower, the tenure for which the loan amount is borrowed, and the interest rate. The interest rate calculated on personal loan EMI is calculated in either of the two ways, which are the flat interest rate method and reducing the interest rate method. As per the flat interest rate method. The person is bound to pay the same EMI over the loan tenure. This means that the EMI is calculated on the entire loan amount. However, in case of reducing interest method, the EMI is calculated on the outstanding balance form the principal amount. Thus, this means that as the borrower keeps on paying the EMI, his principal amount gets reduced.
Further, personal loan EMI is calculated using the formula, P*r* (1+r)^n/([(1+r)^n]-1, using the components ‘p’ the principal amount, ‘n’ the loan tenure and ‘r’ the interest rate. While calculations can be made manually, they could take a lot of time. Thus, for accurate results and for fast results, one can use the personal loan EMI calculators. Using a personal loan EMI calculator, one can easily plan their finances effectively.
Also Read: How Is Personal Loan EMI Calculated
A personal loan is based on three loan components, which are, the loan amount borrowed by the borrower, the tenure for which the loan amount is borrowed, and the interest rate. The interest rate calculated on personal loan EMI is calculated in either of the two ways, which are the flat interest rate method and reducing the interest rate method. As per the flat interest rate method. The person is bound to pay the same EMI over the loan tenure. This means that the EMI is calculated on the entire loan amount. However, in case of reducing interest method, the EMI is calculated on the outstanding balance form the principal amount. Thus, this means that as the borrower keeps on paying the EMI, his principal amount gets reduced.
Further, personal loan EMI is calculated using the formula, P*r* (1+r)^n/([(1+r)^n]-1, using the components ‘p’ the principal amount, ‘n’ the loan tenure and ‘r’ the interest rate. While calculations can be made manually, they could take a lot of time. Thus, for accurate results and for fast results, one can use the personal loan EMI calculators. Using a personal loan EMI calculator, one can easily plan their finances effectively.
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