As per a recent report, the personal finance segment’s transaction value is projected to show a CAGR of 37.8% between 2021 and 2025. Moreover, the total transaction value is anticipated to reach more than Rs.40,00,000 crore by 2025.
While the prospects of this credit segment are quite promising, RBI financial stability reports revealed a worrisome picture of growing NPA.
- The NPA in India is expected to touch 14.7% by March 2021, and personal loans and credit card loans are the main drivers of this scenario.
Hence, individuals should plan their finances and repayment long before availing of unsecured credits like a personal loan. In this regard, individuals can also use an online personal loan calculator that would help them to assess the monthly instalments, total interest payable, etc.
Benefits of using a personal loan calculator
Some of the key advantages of using an online personal loan calculator are mentioned below.
Simple and fast EMI calculation
Generally, one needs to use the following formula to calculate EMI.
EMI = P * r * (1+r) ^n / ((1+r) ^n-1)
Where P = Principal; r = rate of interest; n = tenor
It is, thus, pretty obvious that manual calculation is tedious and increases the risk of an erroneous result. Using an online calculator, on the other hand, one can get proper estimates and decide upon the best possible loan amount and tenor combinations.
Hence, one of the simple ways to manage your debt is using a personal loan calculator that shows almost the accurate results in no time.
Helps deciding reasonable principal and tenor
Since this financial tool mostly comes with a slider, individuals can adjust the tenor and loan amount as many times as they want. This way, one can find the ideal combination of principal amount and tenor for convenient repayment at affordable terms.
With an increasing tenor, the total interest payable will also be high. On the other hand, while reducing the repayment tenor will increase EMIs payable, it will lower the total interest amount. Thus, borrowers can keep on changing these parameters until they arrive at a structure that is financially suitable for them as per their repayment capabilities.
Reliable lending institutions like Bajaj Finserv offer personal loans of up to Rs.25 lakh with minimum personal loan eligibility and affordable interest rates on personal loan to make repayment easier.
They also extend pre-approved offers that make the entire loan application process quicker and simpler. Such offers are available on a range of financial products, like personal loans, business loans, credit cards, etc. You can check your pre-approved offer by providing your name and phone number.
Provides a visual representation of the due amount
Some financial institutions also provide pie chart representations of EMI, total interest payable and net borrowing cost. It helps individuals to get a visual representation of the EMI outgo and other components, thereby helping them to plan repayment accordingly.
For instance, suppose Rahul avails of a personal loan of Rs.15 lakh for a tenor of 36 months at a 14% interest rate. In this case, the total interest payable would be Rs.3,45,595. Thus, approximately 19% would go towards interest payment and 81% for principal repayment.
How to use a personal loan calculator?
Potential borrowers can use an online personal loan calculator easily by following a few simple steps as discussed below.
- Visit the official site of the preferred lender.
- Enter the loan amount, interest rate and tenor.
- Click on “Calculate”.
The results will appear on the screen instantly. Individuals can enter different combinations to get the best possible repayment structure of a personal loan.
Individuals possessing an ideal CIBIL score ranging between 750 and 900, and a proper repayment and credit history are likely to avail of a low interest personal loan.
Therefore, it is evident that using an online personal loan calculator, borrowers can manage their finances efficiently and repay without defaulting. However, you should also be aware of all the fees and charges applicable on your personal loan to make the process more transparent and convenient.