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# How Does a Personal Loan EMI Calculator Work?

by | Jul 16, 2019 | 0 comments

By Author: Neha Sharma

Personal loans come handy as they do not need a collateral or security. Availing it is easy and it has flexible repayment schemes. This helps in meeting expenditures related to travel, wedding or medical. While applying for this loan, it’s important to know one of its important features: EMI.

EMI stands for Equated Monthly Installments. Here, the loan amount is equally divided, so that the monthly payments can be paid to clear off the outstanding loan. This amount is paid every month till the end of your loan tenure as decided while taking the loan.

How is EMI calculated?

EMI is calculated using the loan EMI calculator, using a formula that is: [P x R x (1+R)^N] / [(1+R)^(N-1)]

So, there are three factors that influence your EMI:

P= Principal or your loan amount (This is the total sum of amount borrowed. Higher the loan amount, higher is the EMI)

R= Rate of interest (Interest rate is the extra amount charged for lending a sum of money. Higher R also increases EMI and the cost of the loan)

N= Tenure (loan term in number of years, period within which the loan is decided to be paid completely)

A change in any of the three above mentioned figures will change your EMI. It has two principal components: principal and interest. The interest amount to be paid is higher initially, but towards the end of the loan tenure, the principal amount becomes the larger portion of the EMI.

How to use a personal loan EMI Calculator?

A¬ EMI calculator makes it easy to know the monthly installments to be paid for a specific loan. Such calculators can be used for all types of loan, however here we will see how to calculate an EMI for a personal loan. The most convenient option to calculate your personal loan EMI is by using an online calculator. Designed for ease of usage, it can be operated by anyone. Just enter the loan amount, rate of interest and the tenure and the calculator will display the results of the required EMI. You do not need to know the formulae or any other difficult algorithm. Sliders are given to increase or decrease the components. You can adjust them as per your requirements and know your monthly payments.

This loan calculator can be used to calculate the EMI on a personal loan from any bank or financial institution and as mentioned, are also easy to operate.

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