Tuesday, July 16, 2024
HomeLoansKnow the Benefits of Using a Personal Loan Calculator Before Availing of...

Know the Benefits of Using a Personal Loan Calculator Before Availing of a Personal Loan

India’s ever-evolving credit landscape is witnessing an increased inclination towards small ticket personal loans. In Financial Year 2021, this particular segment saw originations of around Rs. 1.48 crore accounts by volume.

However, many struggled to repay the loans on time due to reduced disposable income. According to CRIF’s data, the delinquency rate for small-ticket personal loans stood at 8.8% till March 2021. To avoid such issues in the future, financial experts are now suggesting borrowers compute their EMI liabilities with a personal loan calculator before making any commitments.

Advantages of Using a Personal Loan EMI Calculator 

A small personal loan remains the most sought-after credit facility to deal with urgent monetary requirements. It has no end-use restrictions feature, which allows borrowers to use the obtained funds for several purposes. From financing educational costs to consolidating multiple small debts, a personal loan can help you meet all your financial needs.

Due to the availability of all these facilities, individuals tend to borrow more than what they truly need. As a result, they find themselves stuck in a debt trap. Financial tools like a personal loan calculator help borrowers evaluate their monthly obligations beforehand to know how much they have to bear every month.

Here are some useful benefits of using this financial tool:

Access to Amortisation Schedule

It not only enables borrowers to calculate the equated monthly instalment amount but also provides a detailed EMI breakup. This way, they get to understand the number of EMIs they will have to pay. This report also lets borrowers know the exact percentage of their loan that has been repaid.

Due to this convenience, one can plan their personal loan EMI repayment better and manage financial liabilities accordingly. By keeping tabs on how many EMIs are left, the due dates, etc., individuals can also avoid penalties.

You May Read: Difference between Personal Loan and Home Loan

Easy for Interest Rates Comparison

Personal loan interest rates vary from one lending institution to another, depending on certain aspects like borrowers’ credit profile, debt-to-income ratio, employment status, etc. It is advisable for borrowers to compare multiple lenders to get the lowest interest rate personal loan and suitable repayment terms. In order to make such comparisons, individuals need to check different combinations of loan amount and repayment tenor. 

An online personal loan calculator is used to compare these. After evaluating EMIs for each combination, they can choose one; they find the most affordable as per their repayment capacities. 

Ensures Accuracy

Calculating monthly obligations manually can be extremely taxing, and the scope of human errors increases because of that. Here is the formula for EMI evaluation: 

EMI= P × r × (1 + r) n/ ((1 + r) n – 1), here P signifies principal amount, n stands for repayment tenor, and r denotes the rate of interest. 

Apart from EMI evaluation, periodic prepayments or foreclosure calculations are also done using this formula. Doing all that manually can be quite time-consuming, especially when you are trying to compare different combinations of loan amount and tenor. A personal loan EMI calculator makes such a process easier and error-free as you just need to enter the values to get the result instantly.

Helps to Keep Decent Credit Profile 

When you are aware of your monthly obligations, you can plan the repayment accordingly. This way, you do not miss EMI payments and end up hampering your credit rating. Having a CIBIL score of 750 or above is necessary to get prompt approval from lenders. It also helps in getting the best personal loan interest rate in future. 

Note that such responsible borrowers also get access to pre-approved offers extended by top financial institutions. These offers are available on several financial products, such as personal loans, credit cards, business loans, etc. To get the best deals for your personal loan, make sure to check your pre-approved offer by submitting your name and contact details. 

Other than these, this online tool also allows borrowers to choose the repayment term at their convenience. Even though a longer tenor makes the equated monthly instalment amount affordable, it also increases the overall interest outgo. Using such tools is necessary to check how much of the monthly instalment goes towards interest payable and decide accordingly. 

Due to easy access to internet facilities, a personal loan calculator is readily available on popular financial websites. All you have to do is enter the inputs correctly to find your EMI obligation and plan your finances based on that.

More from MoneyVisual

Recent Posts

Most Popular

Educational Topics