October 4, 2022

When you take out a personal loan, your lender may offer to finance the cost of the loan with an EMI option. But what exactly does that mean? And how can you use this information to make better decisions about your loans? Understanding EMIs helps you make more informed financial decisions regarding personal loans.

What Is an EMI?

The term EMI stands for equated monthly installment. It refers to the specific amount of money you pay towards your monthly loan balance. Each institution allows you to make these payments over a fixed period. However, your tenure will affect the total amount you pay back on your loan. That means the shorter your tenure, the higher your interest rate. Remember, these terms have their own criteria. According to Lantern Credit, “The actual loan terms you receive, including APR, will depend on the lender you select, their underwriting criteria, and your personal financial factors.”

How Do Banks Determine Your Loan EMIs?

Most banks charge a pre-decided interest rate for a particular loan product. This is the ‘nominal interest rate,’ which has monthly charges. It will rely on several factors such as:

  • The amount you want to borrow
  • The tenure of repayment (in months)
  • Whether you are a salaried or self-employed borrower
  • The credit score of an individual
  • The value of the property purchased as collateral

The EMI of a personal loan calculation relies on two components: Loan Amount and Tenure. It includes many other charges as well. They include processing fees, documentation fees, credit report fees, etc.

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Why Use an EMI Calculator?

An EMI calculator helps you estimate monthly repayments quickly. It’s a great tool for calculating personal, car, credit card, or other installment loans. They can also show you how much time it takes to clear off your debt. And they’re not hard to use. You get an accurate estimate within minutes of entering different monthly installment amounts.

Personal Loans

Personal loans are the best option for those who have poor credit scores. That’s because personal loan rates typically have lower interest. But you can expect to see varied interest rates, terms, and conditions. That’s because many personal loans fit under the unsecured-loan category.

Personal Loan Eligibility

Personal loans are available from a wide range of financial institutions. That includes all popular banks, credit unions, and peer-to-peer lenders. However, each lender has its own guidelines. So determining whether you’re eligible will depend on which institution you choose.

Personal Loan Eligibility Criteria

This criterion includes income, credit score, down payment amount, and loan tenure. You will have to provide details about these factors and other information. Be sure to have your contact details, ID, bank account number, employment status, etc.

Personal loan EMI refers to a customer’s scheduled payments on their personal loan in an easy-to-read format. Many factors go into calculating your personal-loan EMI, so don’t leave it up to chance. You should anticipate how lenders calculate interest rate, tenure, and amount borrowed beforehand.