Whenever you opt for a loan, proper loan planning is extremely critical. Loan planning refers to figuring out the right instalment amount that can fit into your monthly budget without you spending too much on interest payments.
With rapid digitization, there is now no need to rely on the lender to provide an amortization schedule. There is a tool available online that can help you with loan planning. This tool is an EMI calculator.
An EMI calculator is a tool that can help you calculate the monthly instalment amount on your loan. Using this loan calculator is absolutely critical if you plan to make a loan application.
Here are reasons why you should use a loan EMI calculator:
- Free tool:
One of the biggest reasons to use a loan EMI calculator is because this tool is available free of cost. It is available on lender websites for free. You do not have to be a customer of the bank to use the EMI calculator.
- Easy to use:
Using this loan calculator is extremely simple. All you need to do is to enter the principal amount, the rate of interest and the loan tenure. Once these three inputs are entered, you can submit it and the calculator will immediately display the EMI amount. You can also make changes in your inputs and the results will be displayed immediately as well. Even if you have never used an EMI calculator before, these calculators are self explanatory and do not require a lot of information.
- Loan comparison:
One of the best reasons to use a loan calculator is to compare different loan offerings from lenders. Since your loan amount will remain the same, you can change the rate of interest and loan tenure and see the impact on the loan instalment. It is important to have an idea of the monthly servicing required for the loan before you apply for the loan so that you can be sure that you can afford the loan.
- Deciding loan tenure:
It is possible to use a loan calculator to find out the loan tenure. This is because there is an inverse relationship between the loan tenure and the loan instalment amount. The longer the loan tenure, the smaller the loan instalment. The shorter the loan tenure, the higher the loan instalment. However, when the loan tenure is longer, the total interest paid on the loan is higher. When you make the decision to choose your loan tenure, you need to consider the monthly instalment amount, your monthly budgets and the total interest paid. Another factor to consider is whether there are any pre-payment or part repayment charges on the loan.
- Amortisation schedule:
Some loan calculator also have an amortization schedule which they give out with the Loan calculator. The amortization schedule shows the breakup of the instalment amount into principal repayment and interest payment. This schedule helps you to find out the total interest paid for a particular period of time. The loan amortization schedule can help you plan for any part repayments you want to make or figure out the loan tenure.
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