What is personal loan EMI calculator? How to use it and how does it work?

by | Jun 25, 2019 | 0 comments

By Author: Neha Sharma

A personal loan is a type of unsecured loan, which is unconditional. This means the lender does not put any conditions on the fund use for this loan. The borrower can use this loan for any purpose. This flexibility makes the personal loan extremely popular.

If you’re considering applying for a personal loan, you don’t need to wait till your personal loan application is accepted to figure out the EMI. Most lenders offer a personal loan EMI calculator for free on their website.

What is a personal loan EMI calculator?

An EMI calculator helps to calculate the monthly installment amount for a given set of inputs. Depending on the inputs, the personal loan calculator throws out the monthly installment amount. Some calculators also show a breakup between the principal repayment and interest payment. Some calculators show the total interest payment over the duration of the loan.

A personal loan EMI calculator is an excellent tool for the following reasons:

1. It helps with financial planning:
Since an EMI calculator shows the monthly installment amount, it helps to plan monthly finances. Knowing the installment amount can help allocate funds and plan investments.

2. It helps with loan prepayment decisions:
A loan calculator also shows the total amount of interest paid over the loan duration. By knowing the total payout on account of interest, you can plan prepayments or part repayments. Since lenders charge prepayment fees on any prepayments, you can find out the savings in interest expense vis-à-vis the prepayment fees charged.

How to use EMI calculator?

Using a loan calculator is extremely simple. To find out the installment amount, you need to input the principal amount, the rate of interest and the loan tenure. Depending on the loan calculator, the tenure may be in months or in years. Some calculators have the lender’s rate of interest built into the calculator whereas others allow the user to input the rate of interest. Once you input all these requirements, the calculator will calculate the equated monthly installment amount. Some calculators will give additional information such as the installment breakup and the loan repayment schedule.

Since these calculators are free, you can find out the rate of interest charged by different lenders and input it in the calculator to compare the EMI and the total interest repayment. This can also help you select the loan installment that works into your budget as well as requires you to pay the least amount of interest.

Another way to use the EMI calculator is to change the loan tenure and see the impact on the installment. The installment amount is lower if the tenure is longer and vice versa. However, it is beneficial to have a shorter tenure to save on interest costs.

How does EMI calculator work?

An EMI calculator requires three inputs:

• Principal amount
• Rate of interest
• Loan tenure

The formula for calculating EMI is:

P x R x [ (1+ R)^ N] / [ (1+ R) ^ N-1]


P= Principal or loan amount
R= Rate of Interest on loan
N=Tenure of loan in years

The calculator uses this formula to derive the value of the monthly installment amount. No calculator displays this formula to the user. However, once the inputs are entered, the calculator uses the formula.

Author bio:
Neha Sharma is a finance student who loves to write in her free time. She has spent considerable time researching about EMI calculator. Through her work, she has explained how to use it and how it functions

Photo by <a href=”/photographer/OmirOnia-29385″>T. Al Nakib</a> from <a href=”https://freeimages.com/”>FreeImages</a>


Submit a Comment

Your email address will not be published.

Other posts you might like

Contact Me

If you want access to investment plans with good returns on it (ROI) call me Oluwaseun on




[email protected]


35 Modupe Shitta Egbe, Lagos, Nigeria.