Everybody works and earn hard to fulfil his requirements and dreams. Sometimes there comes an odd situation in an individual’s life when hard-earned savings might not be sufficient to satisfy the liabilities. In such an emergency situation, personal loans are an easy and approachable option to meet the requirements. Personal loans help to gain financial support for accomplishing your desires with ease. Personal loans are basically unsecured loans given without any security and can be used for many purposes. This way they provide flexibility in times of emergencies as they provide instant cash, without any conditions on how and where to use the loan amount. Today, most people prefer to go for Online Instant Personal Loans rather than borrowing from family and friends as well. So in a sudden emergency situation when people running out of funds in their savings, they choose personal loans to come over financial difficulties.
A personal loan also comes with some additional benefits apart from instant cash disbursal. One main benefit is that you do not need to give any mortgage or security deposit while applying and availing personal loans. Although personal loans come with a comparatively higher rate of interest as compared to secured loans, still they are lower than what private moneylenders charge in the open market. Another major distinctive feature of personal loans is that it can be used for any purpose unconditionally, unlike secured home loans, car loans, or education loans.
Understanding Personal Loan EMI?
EMI is an acronym for Equated Monthly Instalments. It is an effective amount payable monthly against your loan till the end of the total tenure.
Before understanding EMI calculation we need to aware of some terms or variables on which personal loan is based on:
Loan Amount: Total amount which has been borrowed as a loan.
Interest Rate: The percentage of the loan amount charged from the borrower by the bank or lender. This is represented as an annual percentage of the total outstanding amount of loan.
Tenure: This is the total loan duration or term defined mostly in a number of years or months.
In MS Excel, EMI can be easily calculated by the function PMT. PMT function in Excel uses all three variables as defined above. These variables include Interest Rate, NPER & PV. The exact syntax of the formula of PMT in Excel is =PMT (rate, NPER, PV)
Where Rate is the monthly rate of interest, NPER is the number of periods, and PV is the present value of the loan amount borrowed.
The formula for calculating EMI on personal loan manually is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where P is the Principal Value of the total Loan Amount, R is the monthly Rate of Interest, and N is the Tenure or the Term Period of the loan.
Calculating the EMI from the above formula manually is not very easy and handy for everyone. There may be chances of error in calculation even if you entered a single wrong figure. Therefore, an online calculator mostly available on banks and financial institutions website is a much easier and accurate method. These Online EMI Calculator exact EMI value and chances for error are also few. Before applying for loan calculating the EMI gives a better and clear idea to assess your repayment capability, and also how much actually can afford to borrow. Having a perfect repayment plan prior to applying always improves chances of approval and smooth running of the loan.