Planning to take a loan? Use this simple EMI calculator to estimate the monthly instalment payable. Simply provide the loan amount, the loan tenure and the interest rate of the loan and the calculator will work out the loan Equated Monthly Instalment (EMI). The interest rate considered is on a reducing basis. You can use this calculator to calculate the EMI of any loan be it—personal loans, car loans, two wheeler loans, home loans, consumer loans etc.

What is EMI?

EMI stands for Equated Monthly Instalment which is an amount the borrower is expected to pay to the lender every month over the loan tenure. EMI consists of the interest cost and some part of the principal loan amount which you have to repay. This sum of principal and interest and principal amount is divided by the loan tenure i.e. the number of months to repay loan. This amount is commonly paid on monthly basis.

The interest rate considered is on a reducing basis. In other words, the interest component in your EMI is large during the initial phase of the loan tenure and gradually reduces with each payment. Hence, though your EMI payment might not change, contribution towards principal amount and interest changes over the loan tenure. You end up paying more towards the principal and less towards the interest.

Formula used by the EMI calculator to calculate

The mathematical formula for calculating EMI is as follows:

Loan EMI = P * R * (1+R)n [(1+R)n]-1

P = Principal loan amount;

R = Rate of interest calculated on monthly basis i.e. (R= Annual rate of interest/12/100).

For instance, if R = 8% per annum, then R= 8/12/100 = 0.0067; and

N = the number of monthly installments.

For example, if you borrow Rs 5,00,000 from a bank at 8% rate of interest for a tenure of 10 years then,

EMI = 500000 * 0.0066 * (1+0.0067)120 =6,066.00 [(1+0.0067)120]-1

How to use EMI Calculator?

Manual computation of EMI for different loan amounts is a little difficult and hence PersonalFN’s EMI Calculator comes handy.

Use this simple EMI calculator to estimate the monthly instalment payable. You can use this calculator to calculate the EMI of any loan be it—personal loans, car loans, two-wheeler loans, home loans, consumer loans etc.

This calculator generates result in a split second and enable you to understand whether the monthly payment would be affordable for you.

Loan amount (in rupees) Tenure (in Months or years) Rate of interest (percentage)

You can either use the slider or enter the loan values in the EMI calculator table. As and when you change the input values the calculator will re-calculate and display the new result.

This loan EMI calculator generates not only the EMI result but even tells you the total loan interest payable throughout the loan tenure.

The pie-chart generated by the EMI calculator makes it easier to understand the total principal and interest amount which you are supposed to pay. This will give you a clear picture about the total cash outflow you need to keep in mind before you opt for a loan.

PersonalFN believes that one may have EMI-to-income ratio of about 40% of the total household income.

Factors to consider before opting for a loan:

Rate of Interest – lower the interest rate better for your financial health

The interest rate determines your EMI and has a bearing on your budget and long-term financial wellbeing.

Now taking a loan and paying its EMI may sound rational as you can still meet your expenses comfortably. But this is where you need to be cautious. You might be meeting your expenses today but you also need to make sure that you would be able to do so even in future. As the life stage changes expenditure patterns also change. This is where forecasting comes into picture.

So, make sure you’re availing a loan with a competitive rate of interest. It makes sense to compare interest rates across lenders.

Prepayment charges – nil prepayment charges

If you repay the loan from your own sources, it might attract some prepayment penalty. Pre-payment facility helps in repaying the loan ahead of time. Avoid signing up with an institution that penalises early repayment.

Processing fees – lower the better

Processing fees change from bank to bank. Some banks charge a fixed fee, while others charge a percentage of the approved loan amount. There are some banks which don't charge a processing fee at all.

A higher processing fee impacts the total cash outflow. And should be borne upfront whether you end up taking the loan from the bank or not. Hence, compare all your options before you finalise one.

Credit Score

It is a score you obtain based on your borrowing history and the repayment performance. Higher credit score denotes higher creditworthiness and vice-a-versa. The Credit Information Bureau (India) Limited (CIBIL) assigns credit scores to individuals.

Loan Period – opt for a loan with shorter the tenure

The shorter the loan tenure, the better it is. The table below total cash outflow under different periods.

Loan amount (Rs) Interest rate Term of the loan (years) EMI (Rs) (rounded off) Total cash outflow (Rs) 15,00,000 15% 1 1,35,387 16,24,644 2 72,730 17,45,520 3 51,998 18,71,928 4 41,746 20,03,808 5 35,685 21,41,100

Looking at the table, a layman may choose a loan for a 5 year term considering a smaller EMI. But you would be paying a higher interest cost with a longer term in play. Therefore, the total cash outflow would be higher as the term increases.

The rate of interest varies from bank to bank. From what’s provided on the banks’ websites, the rate of interest can vary from as low as 8.25% to as high as 12.50%. This depends on the creditworthiness of the investor and other factors set by the bank. You can negotiate for the best rate.

Hence, the EMI calculator helps you to make prudent financial decisions. You can certainly achieve some financial goals by opting for a loan. But always ensure that such advances do not add a debt burden to your finances.

But if you already have a loan have taken a loan, say a home loan, and you lose your job and have difficulty getting another job at the same salary. Or for whatever reason, are unable to make the regular EMI payments. Then follow these 5 simple steps to come out of this debt trap.

3 steps to follow when you miss out your EMI obligation:

Step 1: Don't Panic

This is not a rare situation. Banks have customers who default on payments all the time. It might feel like you are alone, but you aren't. There's no need to feel like you have a great weight on your shoulders and you have to bear it by yourself. In fact, your bank will be the first entity willing to help you. Defaulting on your loan, even if it is a home loan, is not the end of the road.

Step 2: Get Your Papers in Order and Call Your Lender

Create a file containing all your past EMI payment details, notices sent to you by the bank if any, details of the loan i.e. date of taking the loan, tenure, interest rate, EMI amount and so forth. Have this handy when you talk to your lender. Tell your lender the genuine reason(s) that have rendered you unable to pay the EMIs, tell them that you would like to pay your loan back as soon as you can, and ask them what their options are.

You will most likely get an initial automated response that reads something like this:

"Dear customer,

We would like to work with you on the issue of your loan repayment - request you to write to us at customercare@abcdbank.com with your loan account number, contact details and the reference id ABCD00001111. A bank representative shall contact you as soon as we receive this information.

Regards, Customer Assistance, ABCD Bank"

Once you revert with the necessary details, you will get a call from your bank and can set up a meeting to calmly and rationally discuss your options.

(Read our article titled 8 Things You Should Know about Home Loans)

Step 3: Consider Your Options, in Dialogue with Your Lender

Can the bank repossess your asset i.e. your car or your home? Legally, yes, they can. But there are a couple of reasons why you don't have to necessarily worry about this.

Firstly, the repossession procedure in India (and in fact elsewhere in the world as well) is very lengthy and there are steps along the way where you and the bank can work together to come to a satisfactory deal.

If you have paid your EMIs on time until now, the bank knows you as a genuine borrower, and will take this into consideration when working together with you to find a mutually feasible solution. 'Genuine intent' to repay is the single largest thing that will work in your favour. Be sure to make it very clear to your bank that you do intend to repay and would like to work together to find a solution. Genuine reasons that banks understand are loss of a job, illness, or an accident that may render you unable to work. You might also have multiple loans, and find yourself in too much debt to handle.

(Read our article titled How to Get out of Too Much Debt)

Secondly, the bank doesn't want to repossess your assets, it wants you to pay the money owed, or at least most or part of it. If you default, the bank's NPA ratio (Non Performing Assets) goes up. This reflects badly on the bank. Also, they lose out on the money you would have paid them. So, the bank will much prefer to cut you a deal.

Here are your options the bank may offer you when paying EMIs get tough...

Refinancing your loan If the problem is one where the EMI is too high, the bank will restructure your loan. It will reduce your EMI amount and increase the tenure. You can use our EMI calculator beforehand to plan your finances. This way, you can pay the EMI comfortably, and the bank too does not lose out, as it recovers the interest over the longer tenure. But keep in mind that the payments you now make will eventually cost you more, in terms of total money repaid; but if breathing room is what you need, this will provide it. Deferring Your Payments Maybe the problem is not that you can't pay enough; it is that you can't pay at all. You can approach the bank for deferral of your payments, if you are in a position where you feel that within a few months your financial situation will change. Maybe you will get a new job and be able to start repaying your loan a little bit at a time, perhaps at a lower EMI. The bank will grant relief, giving you a window of opportunity to calmly seek ways to increase your cash flows. Lump Sum Settlements This, for obvious reasons might not be feasible for a home loan, but it can work for a personal loan, credit card debt, or a car loan. On a case to case basis, banks sometimes facilitate you to make a lump sum settlement of outstanding dues. They may waive some of the charges or some of the amount and charges, and you can pay the rest as a loan settlement. However, this may muddle your credit score. Getting a loan in the future, if you want one, may become either very difficult or very expensive, or both.

Here are additional steps you can take to manage your finances during a crisis, apart from negotiating with the creditors...

Reduce your expenses Find additional sources of income Make a list of your assets Sell unwanted items Consult an expert

To live a healthy financial life, make sure you:

Maintain sufficient contingency reserves Don't fall into a debt trap Have adequate life and health insurance Undertake financial planning

To conclude..

Naturally, the best solution is not to get into messy financial situations in the first place. One of the main tenets of financial planning is 'safety'. Our life is filled with uncertainties. Although you can't do much to avoid what's meant to be, it is wise to at least be prepared for unforeseen situation.

PersonalFN is of the view that if you are disciplined in your approach towards financial planning, then it will be easier to keep your financial health in the pink.