If and when you are applying for a loan, you will come across something called the EMI. What is EMI? The expansion of EMI is Equated Monthly Installment. EMIs are a fixed amount of money that is repaid to the lender over the duration of the loan. As the name implies, EMIs are to be paid every month. Why is this something you need to remember? You have the option of choosing an EMI amount that is comfortable for you. In the event that you do not choose an EMI rate that is suitable for you, you might default on payment causing your credit score to get lowered.
So how do you calculate EMI?
You need the details of your loan such as the loan amount, the rate of interest and the duration of the loan along with the processing fees associated with the loan. With these, you can use any online EMI calculator tool to get an idea of the EMI you need to pay. The BankBazaar App, which is available on the Google Play Store and on the Apple App Store, is particularly useful in this regard. The app now has the EMI Calculator to help you calculate your EMI based on your loan particulars and thus help you evaluate which loan plan and EMI rate will best suit you.
What do you need to look out for with regard to EMIs?
Ensure that you choose an EMI plan that you can manage. You should keep in mind at all times that the EMI amount has to be one that you can definitely pay off every month, in addition to any other recurring basic living expenditures that you may have for those months.
What is to be done if you have a high EMI?
In the event that you have a high EMI that you cannot afford, you can choose to opt for a loan that has a longer tenure. If the loan can be repaid over a longer period of time, then lenders reduce EMI. If you increase the tenure and still find that your EMI is high, you should consider taking a lower amount on loan. This way, the total amount that you have to repay will be lesser, reducing the EMI that you need to pay.
Can you use the Bankbazaar EMI Calculator for different interest rates?
Yes, you can. The EMI Calculator built into the app can help you compare different interest rates. In the event that you have a floating interest rate in which the interest rate will change after a fixed period of time, you can input both the initial and the changed interest rates to calculate the EMI that you will have to pay.
Can you calculate the EMI for different types of loans?
Yes, of course you can. There are EMI Calculators for home loans, car loans, personal loans, and business loans. It is also possible to calculate simple interest loan EMI rates.
What are the benefits of using the Bankbazaar EMI Calculator?
- The most visible benefit is that you do not have to take a pen and paper to calculate the EMI. You just have to input details and wait for the result. This is extremely convenient.
- It is accurate. It is not prone to the errors that humans make when they calculate using a lot of numbers.
- It is definitely a faster method to calculate EMI compared to you doing it by hand.
- You can obtain EMI details that are specific to each type of loan and its related interest rate.
- You can obtain a pictorial representation of the amounts already paid and the amounts to be paid in the future. This representation is usually in the form of a graph.
- An amortization table that indicates the progress of your loan over time can also be generated.
What else should you know?
While the EMI Calculator is accurate, it is specific to inputs you have provided so that you can get a fair idea of how much you are paying and for what. The actual amount that you pay might vary slightly owing to other fees that the bank may have or even due to a different interest rate. The EMI Calculator will give you a quick look at what you can expect to pay. It is just a tool to guide you in your financial planning.
Yet another thing you should know is that closing your loan before the end of its tenure can sometimes affect your credit score in a negative way and lenders might even charge a penalty fee for prepayment since they lose the opportunity to earn long-term interest. It would be a better idea to plan out EMI payments to maintain your credit score. If you are really keen on repaying your loan sooner, consider making a partial repayment of your loan amount and reduce your loan tenure and most likely not attract a penalty fee.
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