How do you check prepayment details of your personal loan with an EMI Calculator?

A personal loan is an unsecured loan given out for a fixed tenure at a fixed interest rate. Be it a marriage, a medical emergency or a foreign vacation, banks offer a hassle free personal loan to fulfill your dream. No collaterals, or guarantors are required to apply for this loan which can be approved faster. Usually, banks charge a higher rate of interest on a Personal Loan.

How to apply for a personal loan?

Most banks and financial institutions offer a personal loan but with higher internet penetration and increased use of smart phones, the application process has also moved online. Now consumers have access to several third-party aggregator websites that act as intermediaries between the customer seeking a loan and the banks. They also offer several choices of personal loans on their website, let the customer compare various products, processing fees, interest rates etc and make a wise choice.

These websites offer a handy tool called a Personal Loan EMI calculator that allows the customer to fill in details like the loan amount, repayment details and tenure and interest rate, and know their Equated Monthly Instalments (EMIs) in a jiffy.

How to use a Personal Loan EMI Calculator?

To use the EMI calculator, you must feed in several loan parameters like:

• If you know the amount, processing fees, tenure and interest rates of your personal loan, fill in those details. If prepayments are planned, then factor in the amount to be prepaid and regularity of such prepayments as per the loan agreement.
• Most of the online calculators provide boxes or slider scales to fill in the details. Once you have accurately entered details, click ‘Calculate.’
• The calculator then calculates the pattern of repayment of your loan. It then displays an amortization table, the total interest that is charged to customer, and the timetable of repayment are displayed in minute detail to help you make an informed decision.

How to know loan tenure and EMI when you are opting for prepayment?

The online Personal Loan EMI Calculator also lets you arrive at your exact tenure and EMI amount in case you are planning prepayment of the loan. Prepayments at regular intervals, as and when you have access to surplus cash such as a bonus, a promotion or an inheritance, can reduce your interest burden and tenure of repayment.

How does prepayment help you?

By prepaying a component of Personal Loan, you actually reduce the period of repayment and therefore total interest charged! This works in the following way. Whenever you prepay, the prepayment amount is deducted from the outstanding principal amount. Thus by prepaying small amounts on a regular basis you can reduce your repayment tenure and thereby your total interest component in the loan! Some of the online EMI calculators allow you to figure out how much savings you can make in interest charged on your current loan.

A customer should ideally opt for a safe loan repayment tenure. Not more than 40-50% of his monthly income should be spent on loan repayment. They should prepay whenever they have access to chunks of cash as in a bonus, a salary hike or an inheritance. By using the online Personal Loan EMI calculator and by making regular prepayments they can save on interest and choose the most suitable way to manage their loan burden.