A sound loan payment planning is a crucial part of any borrowing, irrespective of the financial product. To that end, various lending institutions offer online personal loan calculators to simplify the repayment planning structure.
Importance of Credit Repayment
Whenever an individual avails a loan for an emergency purpose, they are liable to repay the principal amount and a certain amount of interest within a fixed tenor. Loan Payment is an essential factor in reducing loan liability and payable interest and is also reflected in the credit history. A borrower’s credit health reflects their credibility of repaying the loan amount. A borrower with a poor credit history is considered risky by any lending institution.
Paying off a loan on time is crucial as it can impact a borrower’s loan liability, credit history, and score. Therefore, borrowers must know how the CIBIL score is important for personal lending and try to improve it to ensure flexible loan terms.
Usually, the loan repayment option depends on the lender and the type of lender. Some loan products also allow individuals to repay through bullet repayment, where they need to pay the interest component every month. After the end of the tenor, they need to pay off the entire principal amount.
Individuals can choose to repay the entire loan amount before the end of the tenor. However, for doing that, one must ensure that there are no pre-payment charges applicable. As already mentioned, the loan repayment comprises monthly installments involving principal and interest components.
Let’s understand with a simple example.
Example: If a borrower opts for a personal loan of Rs. 10,00,000 against an interest rate of 14% for a tenor of 36 months, the loan EMI will be Rs. 34,178. The overall repaying amount involving the principal and interest component would be Rs.12,30,397.
Besides, borrowers can take assistance from the amortization table that one can avail from the financial institution. It will enable borrowers to evaluate loan repayment and interest component by using an online personal loan EMI calculator. This online tool will let borrowers know how to efficiently manage their personal loan EMI repayments.
However, default or non-repayment of monthly installments will also become a hurdle for the borrowers to avail credit in the future. This is why timely repayment is crucial as it helps build positive credit reports and improves approval chances with lower personal loan interest.
To avoid default in payment, borrowers can explore different options, such as arranging additional income, loan refinancing, and discussing with financial lenders to negotiate the loan agreement.
How to calculate loan repayment?
Having the knowledge about repayment amounts will allow borrowers to manage their payment schedule and overall budget. Thus, before knowing how to apply for a personal loan, one should understand the type of loan they will receive as it will impact the ultimate repayment.
If you are applying for an Instant loan for salaried employees and want to calculate the repayment, you need to input the following determinants.
- Principal amount
- Repayment tenor
- Interest rate
These easy-to-use calculators offered by Bajaj Finserv will enable borrowers to plan their EMI repayment effectively. The tool will display the overall amount within a few seconds after inputting these determinants.
Besides, individuals can use the following mathematical formula to determine the EMIs to be paid to the lender-
P x R x (1+R) ^ N / [(1 +R) ^ (N-1)]
Here, P denotes principal, N is repayment tenor, and R is the rate of interest.
Moreover, to avail results that suit your financial affordability, you can tweak the loan amount and repayment tenor in the calculator. In certain calculators, one can also view specific pie charts, establishing relations between the principal and payable interest.
Apart from these, if individuals are willing to avail a small personal loan to meet their urgent financial requirements, they can apply via multiple online personal loan applications. The repayment structure is quite flexible but depends on the lender and policy that one chooses.
In this regard, existing borrowers can also avail of pre-approved offers as an additional benefit on a wide range of financing options, such as personal loans, business loans, credit cards etc. Additionally, these offers expedite the procedure of loan application and save time. Enter your name and contact information to check your pre-approved offer.
Thus, apart from using an EMI calculator, one can also use a loan eligibility calculator to understand the qualifying amount and plan loan repayment accordingly.
Read Also: Things to Keep in Mind While Using a Home Loan Calculator
