Personal loan is one of the easiest and most convenient solutions to meet your immediate financial obligations. Whether you have a medical emergency or wish to clear off your debts, or need money to go on a vacation, personal loans come in very handy. They’re extremely easy to avail as opposed to any other loan because they don’t require the submission of any collateral. They’re also for shorter tenures, involve quick processing, and are disbursed almost immediately.
However, this ease of availing funds often leads borrowers to overlook some of its aspects. Particularly, the EMI calculator – which can make the credit-taking process even easier.
How Personal Loan EMI calculators help you
Calculating the EMI amounts for various loan options can be extremely tedious. This is exactly why there exists a wonderful financial tool called an EMI calculator. It computes and displays the EMI amount to be paid every month. All you need to do is enter the three parameters – interest rate, principal amount, and tenure – and you get the results in an instant.
Pick the right lender
Personal loan EMI calculators are digital and automated, meaning there’s no room for error while calculating your EMI amounts unless you input the wrong values. Knowing the EMI amounts in advance can help you manage your finances better and it makes all the difference in choosing the right lender.
Choose the right loan amount and tenure
You can use a personal loan EMI calculator as many times as you want. If you feel that the EMI amounts are too high, decrease the principal amount or increase the tenure, or do both in the calculator until you reach the best-suited parameters for you.
Know your repayment capability
EMIs eat up a major chunk of your income every month. Knowing the EMI amounts in advance, preferably at the time of the application of the loan, can help you plan your finances accordingly. A personal loan EMI calculator thus lets you know if you can repay the loan on time.
Of course, there are several other important aspects to keep in mind.
Compare Interest Rates
Over the last few years, the unsecured loan market has become highly competitive. You’ll find tons of personal loan lenders online and they’ll be ready to grant you an unsecured personal loan if you meet their basic eligibility criteria. Compare the interest rates to find the best deal that suits you. Apart from interest rates, the lenders charge you other fees like a pre-processing fee, penalty on late payment, etc hidden in the fine print. A lender might have a low-interest rate, but other high charges. Make sure you consider all rates and choose the best lender with minimum overall rates.
Have a good credit score
Since personal loans are unsecured and collateral-free, one of the most important factors considered by lenders before granting you a personal loan is the credit score. Your credit score shows your credibility as a borrower and helps the lenders decide how big of a risk you are for them. People with good credit scores are more likely to get loans easily at a negotiable rate of interest. The CIBIL score ranges from 300-900 and a score between 720 and 750 is considered ideal. A lower credit score denotes bad debt management and may result in your loan application being rejected.
Repayment Capability and period
Before borrowing a loan, prepare for its repayment. You will have to repay the amount you borrow in Equated Monthly Instalments (EMIs), which means that you need to have enough funds every month to meet the repayment expenses. Failure to service the EMIs will result in penalties and also spoil your credit score. For a smoother repayment of the loan, consider your affordability and account for other expenditures every month properly. Good monetary planning is essential to do this.
Also, keep in mind that a longer tenure implies higher overall interest outgo and a shorter tenure implies a higher EMI amount every month. To reduce your overall interest amount, consider overpaying your EMI amount whenever you have surplus funds.
Don’t apply to multiple lenders
Whenever you apply for a loan, the lender fetches your credit report from the credit bureau to evaluate your creditworthiness and repayment capability. Such credit report requests pull down your credit score, albeit marginally. Making multiple inquiries within a short span of time can portray you as credit hungry, which might lead to the rejection of your personal loan application.
Personal loans are the best to tackle financial emergencies. Keeping these simple tips in mind when applying for a personal loan can make the whole loan application process smooth and hassle-free.
A Personal loan works best when it is affordable and accessible, with no hidden fees and low interest. Determining the actual cost, of course, depends on your use of a personal loan EMI calculator, to know your EMI amounts in advance.