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Loans have become an indispensable part of our lives. Whether you are buying a home or looking to finance your child’s higher education dreams, loans can offer the funds needed to reach various milestones. When you obtain a loan, you have to repay the borrowed sum in easy monthly installments or EMIs. To understand your monthly payments and make informed choices, you can rely on loan EMI calculators.
EMI calculators calculate the monthly installment payable on a loan on the basis of the loan amount, selected loan tenure, and applicable interest rate. Using this tool can help you plan your loans better and make informed financial commitments. Here’s how an EMI calculator can assist you in effective loan planning:
Estimate your monthly obligations
An EMI calculator is primarily used to calculate the exact monthly payment you need to make towards a loan based on the loan amount, tenure, and interest rate entered. Based on the EMI estimate, you can plan your monthly budget and set aside funds to meet these loan costs. When you check EMI obligations before applying for a loan, you understand if the repayment burden indeed fits your budget. Doing so helps you better manage your finances and avoid overcommitting.
Select the right loan offer
Banks and NBFCs offer varying interest rates on loans depending on their internal policies, creditworthiness of the borrower, and other such factors. Since even a slight change in interest rates can impact the overall cost of the loan, you should use an EMI calculator to see which lender is offering the best terms. By testing out different scenarios, you can compare offers and find one that matches your financial needs.
Pick the right tenure
Both the magnitude of your loan EMIs and the total interest paid on the loan depend on the tenure of the loan. Choosing a longer loan tenure makes EMIs more manageable, but it also increases the total interest paid on the loan. A shorter loan tenure, on the other hand, can save interest expenses but increase the quantum of your monthly payments. An EMI calculator can help you strike the right balance between immediate affordability and long-term interest costs. You can run multiple simulations on the tool to see how different tenures impact your EMIs and overall interest payments to find the best tenure option.
Help you borrow within your means
If you borrow beyond what you can afford, you risk straining your finances. In such cases, you may be forced to miss payments, pay penalties, or even default on the loan. An EMI calculator can help you avoid these problems by showing you the exact value of your repayments. You can use this tool to experiment with different loan amounts and tenures to see how your EMI outcomes vary. After evaluating all the different results, you can select a loan amount that meets your repayment capacity.
Plan your budget
Most of us already have monthly budgets in place to tackle expenses like rent, utilities, and groceries as well as plan for savings and investments. You risk overburdening your existing budget with fresh EMI payments when you apply for a new loan. Therefore, you need to plan how you accommodate EMI payments in your budget. This can include steps like reducing discretionary spending on dining out and shopping or even taking up a side hustle.
Conclusion
Loan planning becomes easier when you have access to an EMI calculator. This calculator tool helps you compute your monthly installments, budget, and plan ahead. It also helps compare interest rates, tenures, and borrowing amounts to make sure you only take on debt you can handle. Since EMI calculators are easily available on online marketplaces and other aggregator sites, you can undertake loan planning without any hassles.
