How do I calculate my monthly repayment amount for a personal loan?

Calculating the monthly repayment amount or EMI for a personal loan is a vital step in managing your finances and planning your budget. The EMI is determined by three main factors: the principal loan amount (the amount you borrow), the interest rate charged by the lender, and the loan tenure (the period over which you will repay the loan, usually in months).

The monthly repayment amount, or EMI, for a personal loan is calculated utilising the principal amount, interest rate, and loan tenure. The standard formula for EMI calculation is:

EMI = [P x R x (1+R)^N] / [(1+R)^N – 1]

P is the principal, R is the monthly interest rate while N denotes the number of monthly instalments. To use this formula, first convert the yearly interest rate into a monthly rate by dividing it by 12. Post that plug the values for the principal, monthly interest rate, and tenure into the formula to get your EMI. For e.g., if you borrow ₹1,00,000 at an annual interest rate of 12% for 24 months, the monthly interest rate would be 1% (12%/12), and you can calculate the EMI accordingly.

For those who prefer a simpler method, online EMI calculators are widely available. These tools let you to enter the loan amount, interest rate and tenure, and instantly display the EMI. Using an EMI calculator helps you:

• Compare different loan options and repayment schedules,
• Adjust the loan amount or tenure to fit your monthly budget,
• Understand the total interest payable over the loan period.

Accurately calculating your EMI ensures you choose a personal loan that aligns with your repayment capacity and helps you avoid financial strain. This helps in budgeting and ensures you choose a loan that fits your repayment capacity.