Personal loans have increasingly emerged as a convenient option for handling numerous planned and unplanned financial requirements. Be it hospital bills, vacations, or higher studies, the repayment pattern needs to be understood prior to availing of the loan. The Equated Monthly Instalment (EMI) is one significant factor to consider, which could serve the purpose of planning monthly expenditures efficiently. This article discusses the steps to determine the EMI of a ₹4 lakh personal loan while considering some of the influencing factors.
How to Calculate EMI for ₹4 Lakh Personal Loan
There are two methods often used for calculating personal loan EMIs, which are online EMI calculators provided by banks and NBFCs the second method is through a manual formula.
Using Online EMI Calculators
The majority of banks and NBFCs offer digital EMI calculators. Online EMI calculators provide an easy and time-efficient method of estimating your ₹4 lakh personal loan EMI in a few clicks. The calculator usually needs some basic inputs such as the loan amount, the rate of interest, and the tenure. Based on these inputs, the calculator immediately shows an estimated EMI. It is a quick and easy way of comparing EMI options among different lenders.
Here are the steps that are often used for calculating EMI online:
Go to the EMI Calculator Tool
Visit your desired lender's website and go to their personal loan EMI calculator tool.
Enter the Loan Amount
Enter the loan amount, i.e. ₹4,00,000, into the appropriate field.
Choose the Interest Rate
Enter the interest rate provided or assumed (for example, 12% per annum). In case of doubt,
take an average rate based on the existing offering of lenders.
Select the Loan Tenure
Select the tenure in months (12, 24, 36, etc., up to 60 months).
Check the EMI Output
Once all fields have been entered, the calculator tends to show:
- Monthly EMI
- Total Interest Payable
- Total Repayment Amount (principal + interest)
Change Inputs to Compare Options
Modify the interest rate or tenure to compare different EMI scenarios and understand how changes may affect your monthly outflow.
Applying the EMI Formula
The formula for calculating EMI is as follows:
EMI = [P×r×(1+r) ^n] / ((1+r) ^n-1)
Where:
P = Amount of loan (₹4,00,000)
R = Monthly rate of interest (Annual rate of interest divided by 12)
N = Tenure of loan in months
Example:
If a borrower avails a ₹4 lakh personal loan at an interest rate of 12% p.a. for 1 year, then
R = 12 / (12 × 100) = 0.01
N = 12
Now, applying the values:
EMI = [4,00,000 × 0.01 × (1 + 0.01)^12] / [(1 + 0.01)^12 – 1]
= [4,000 × (1.01)^12] / [(1.01)^12 – 1]
= [4,000 × 1.126825] / [1.126825 – 1]
= 4,507.3 / 0.126825
₹35,541
So, the estimated EMI for a ₹4 lakh personal loan at 12% p.a. for 12 months is approximately ₹35,541 per month.
Note: The final EMI may slightly vary depending on the lender's policies and interest calculations.
Conclusion
Estimating the EMI for a ₹4 lakh personal loan may help in budgeting your monthly finances effectively. Financial calculators provided by lenders like Fibe may offer a simplified way to estimate EMIs. Using online EMI calculators may make it easier to plan your repayments. Adjusting and checking different tenures and interest rates before making a decision may help in making informed choices. Understanding this process may allow you to make informed choices while exploring loan options based on your financial needs.
