Planning to take out a personal loan but uncertain about the monthly payments? Look no further! Calculating the Equated Monthly Instalment (EMI) can help individuals make strategic decisions on personal loans. This blog post guides readers through the process of personal loan EMI calculation, enabling them to plan their budgets with ease. By following the easy steps outlined below, anyone can calculate personal loan EMI in Excel and determine the amount they will be paying back each month.
Key Highlights
- Personal loan EMI calculation is important because it enables effective financial planning, helps in comparing rates from different lenders, choosing the loan amount and tenure based on repayment capability.
- The calculation process involves entering loan details in an Excel sheet, calculating the monthly interest rate, total number of payments and using the PMT function to calculate EMI.
- Important things to note while calculating personal loan EMI in Excel include converting the annual interest rate to monthly, updating the formula with the latest interest rate, setting aside some funds for emergencies and basic expenses and double-checking all values.
Why Calculate Personal Loan EMI?
Personal loan EMI calculation has several advantages that can help borrowers make strategic decisions regarding their personal loans:
- It enables effective financial planning and reduces the chances of loan default.
- Comparing rates from different lenders helps select the loan option that best suits the borrower's needs.
- Choosing the loan amount and tenure based on repayment capability reduces the chances of loan rejection.
- Loan management through personal loan EMI calculation can help maintain a good credit history.
Calculate Personal Loan EMI using Excel
Calculating personal loan EMI using Excel is a simple process that involves entering a few key variables and using a built-in Excel function to calculate the monthly instalment. Follow these steps to calculate your personal loan EMI using Excel:
Step 1: Enter Loan Details
Enter the details of your personal loan, such as the loan amount, interest rate and loan tenure. Open a new Excel spreadsheet and create four columns: Loan Amount, Interest Rate, Loan Tenure and Number of Monthly Instalments. Under each column, enter the corresponding values for your loan, such as a loan amount of ₹1,00,000, an interest rate of 12%* p.a. and a loan tenure of 3 years.
Step 2: Calculate Monthly Interest Rate
Next, calculate the monthly interest rate. Divide the annual rate by 12 to get the monthly interest rate. For example, if the annual interest rate is 12%, the monthly interest rate would be 12%/12 = 1% or 0.01.
Step 3: Calculate the Total Number of Monthly Payments
The total number of payments is equal to the loan tenure multiplied by 12. For example, if the loan tenure is 3 years, the total number of payments would be 3 x 12 = 36.
Step 4: Use PMT Function
To calculate your personal loan EMI, use the built-in Excel function called PMT. The PMT function takes three arguments: the monthly interest rate, the total number of payments and the loan amount. In the cell where you want to display your EMI, enter the following formula:
=PMT(monthly interest rate, total number of payments, -loan amount)
For example, if the monthly interest rate is 0.01, the total number of payments is 36 and the loan amount is ₹1,00,000, the formula would be =PMT(0.01, 36, -1,00,000). This will give you the monthly instalment you need to pay towards your personal loan.
Step 5: Adjust Variables
To see how different variables can impact your monthly payments, the borrower can adjust the loan amount, interest rate and loan tenure. By simply changing the corresponding values in the Loan Amount, Interest Rate and Loan Tenure columns. Based on the updated inputs, the EMI value will automatically update.
Personal loan EMI calculation using Excel is a simple process that can help borrowers better understand their monthly payments and plan their finances accordingly. By following these steps, it becomes easy to calculate personal loan EMI in Excel.
Points to Note: Personal Loan EMI
Here are some important things to keep in mind while calculating personal loan EMI in Excel:
- Convert the annual interest rate to monthly by dividing it by 12
- Keep the Excel formula updated with the latest interest rate
- Set aside some funds for emergencies and basic expenses before deciding on the EMI amount
- Double-check all values entered in the Excel formula to avoid errors that can disrupt the budget planning
Factors Affecting the EMI Amount
The Equated Monthly Instalment (EMI) amount for a loan depends on various factors, such as:
- Loan Amount: The amount borrowed directly affects the monthly instalment, with larger loans resulting in higher EMIs.
- Repayment Tenure: Longer repayment tenures lead to lower monthly instalments, while shorter tenures result in higher EMIs.
- Rate of Interest: Higher interest rates result in higher EMIs, while lower rates translate to lower instalments.
- Down Payment Amount: Larger down payments reduce the loan amount, leading to lower monthly instalments.
Personal Loan with Shriram Finance
Consider the Shriram Personal Loan to fulfill your financial needs. Some of its features include:
- Borrow up to ₹15,00,000 without the need for collateral
- Avail of flexible repayment tenure ranging from 12 to 60 months
- Interest rates start from 12%* p.a.
- Processing fees begin at 1% of the total loan amount
- Prepayment charges apply as per the terms and conditions for the remaining loan amount
Calculate Personal Loan EMI in Excel and Take Informed Decisions
Personal loan EMI calculation in Excel can be simple once we have the correct formula. Alternatively, most lending institutions offer online EMI calculators on their websites. Check out Shriram Finance EMI calculator to calculate the instalment amount for personal loans. These calculators only require basic details such as loan amount, interest rate and tenure to provide an instant EMI amount. By using these online tools, borrowers can ensure that their calculations are accurate, up-to-date and less prone to human errors.
FAQs
- How to calculate the personal loan EMI formula?
The formula for personal loan EMI calculation is:
[P x R x (1+R)^N]/[(1+R)^N-1]
Here;
P = Principal loan amount
R = Interest rate per month (annual interest rate divided by 12)
N = Number of monthly instalments
- What is the formula to calculate personal loan EMI in Excel?
The formula to calculate personal loan EMI in Excel is:
=PMT(monthly interest rate, total number of payments, -loan amount)
- How do I calculate my personal loan payments without Excel?
To calculate personal loan EMI without Excel, use Shriram Finance’s personal loan EMI calculator. Enter the required loan amount, interest rate and loan tenure to get the exact amount required to pay in each instalment.
