How Can You Calculate Your Personal Loan Eligibility Using MyMoneyMantra’s EMI Calculator?

There are times when you may need to fulfill a specific financial obligation but may not have the necessary means to do so. In such situations, borrowing the required amount of funds proves to be the best way out. While you can borrow a sum of a few thousand rupees from a family member or friend, but if you require a hefty amount ranging in a few lakhs, you ought to rely on a bank or lender for the same. Regardless of the purpose you need money for, a Personal Loan can almost always prove to be of help.

A Personal Loan is typically an unsecured loan, which can be obtained by a bank or lender. This loan can be repaid in equated monthly instalments (EMIs) ranging anywhere from 12 to 60 months, depending on the terms of the loan. If you enjoy a good credit history, you can expect to get a low-interest rate personal loan. More often than not, borrowers use the fund procured as Personal Loans for:

• Medical emergencies
• Sponsoring higher education
• Meeting the expenses of a wedding
• Enjoying a vacation
• Educational purpose
• Home renovation

As a generalised assumption, your Personal Loan eligibility comprises of 4 aspects:

• Employment: You should either be a salaried individual, a business owner, or a self-employed professional. You should have a minimum experience of 1-2 years in your current field of work (depends on the policy of the lender).
• Age: You should be aged between 21-65 years (vary from lender to lender).
• Income: You should have a minimum annual income of 2 Lakhs.
• Credit Score: A credit score of 700 or above is preferable. However, you can still apply for a Personal Loan, albeit you must be prepared to get approval at comparatively higher interest rates.

Before Applying for a Personal Loan, there are three essential things one must do to get the best deal:

• Compare various Personal Loan offers across the top banks and choose one with a low interest rate and flexible repayment options.
• Check your loan eligibility online to ensure you have higher chances of loan approval.
• Use an online Personal Loan EMI Calculator to find out how much the loan will cost you monthly.

How to Calculate Your EMI?

Because you may have to pay the EMIs for any number of months between 12 and 60, it is crucial that you completely understand the intricate calculations involved. Not only should you take a keen interest in the applicable rate of interest, but also in the method which the lender uses to arrive upon an EMI for your loan. This will help you understand the implications of your credit in a more efficient manner, while also allowing you to make the right calls concerning prepayment, foreclosure as well as availing the entitled tax benefits.

As mentioned before, an EMI essentially comprises two components – Principal and Interest. At the very beginning of your repayment cycle, the interest forms the more substantial part of your EMI. However, as time progresses, the interest reduces. Eventually, the principal becomes the more significant part of the monthly instalment. A Personal Loan EMI usually depends on three aspects – Principal, Interest rate, and Tenure.

• Principal denotes the actual amount borrowed by the applicant and has a direct impact on the EMI. The higher the principal, the larger the EMI.
• The Interest Rate refers to the cost of borrowing the money. More often than not, the rate is determined by the borrower’s credit history, income levels as well as their ability to repay the amount. The rate may be fixed or floating, depending on the terms of the loan. Regardless of the type of interest, the higher the rate, the more is the EMI.
• Tenure is the period over which the borrower agrees to settle the loan. It is inversely proportional to the EMI. Hence, a borrower looking for smaller EMIs should opt for a longer tenure.

EMI Calculator

The EMI for any amount of loan can be calculated using a simple math formula.

EMI = [P x R x (1+R)n] / [(1+R)n – 1]

Here,

• P ~ Principal
• R ~ Monthly Rate of Interest
• N ~ Loan Tenure (no. of months)

The lender usually mentions an annual rate of interest. For the above formula, you can easily convert the yearly rate to monthly, by dividing it by 12.

We understand that all of this may seem overwhelming to look at. However, with MyMoneyMantra’s EMI Calculator, all you need to do is:

1. Enter the loan amount you want to apply for
2. Enter the expected interest rate (as suggested by your MyMoneyMantra Product Guide)
3. Enter the loan tenure (in months)

Once you key in these details, the EMI calculator will offer accurate results for-

• Your Loan EMI
• The Total Interest Payable
• Total of Payments, i.e., Principal + Interest to be paid, over the course of your repayment tenure.

Besides, a coloured pie-chart will help you understand the proportion of the principal amount as compared to the interest that you will be paying.

Here, it is essential to understand, that you loan EMI should not exceed 50% of your monthly income. In case that happens, it will create an excessive financial burden on you and your family, and will adversely impact the quality of your life. Besides, it will also affect your loan eligibility, by raising concerns about your ability to repay.

Depending upon the results, you can either reduce your principal amount or increase your tenure, to adjust the EMI to suit your current income and ongoing expenses. This will help you conveniently repay your loan, while also enhancing your chances of getting a quick approval.