Monday, March 19, 2018

How to Find the Best Rates for a Loan by Using a Loan Calculator

A loan calculator has appeared as a boon for all those people who like to keep their expenses and financial disbursals streamlined. This online tool is not only used to determine the loan eligibility but is also used to calculate and find the best rates on a loan. To put it simply, a loan is one of the common ways to cope up with the urgent money requirements; however, to settle the loan amount, a borrower has to pay fixed monthly EMIs to the bank throughout the loan term.

An EMI stands for the Equated Monthly Installments that the borrower has to pay to the lender within the stipulated period of time. One must calculate the loan EMI prior to getting a loan as it helps him borrow the amount which can be easily repaid. Initially, the interest component of the EMI would be larger than the principal amount, but as soon as the loan depreciates, the principal component forms the major part of the EMI.

Here’s the formula to calculate EMI

E = P .r. (1+r) n / ((1+r) n – 1), where,

E stands for EMI

P is the principal loan amount you are applying for

R is the interest rate calculated on the monthly basis (it can be calculated as rate of annual interest/12/100. So if the interest charged by bank is 10.5% per annum, it can be calculated as 10.5/12/100 = 0.00875)

N is the loan tenure or the duration in number of months

So let’s suppose if your borrowed Rs 10, 00,000/- as loan from the bank at an annual interest rate of 10.5% for 10 years (or 120 months) that your monthly EMI would be

10, 00,000 * 0.00875 (1+ 0.00875) 120 / ((1+0.00875)120 -1) = Rs. 13, 493/-

Now the total amount payable to the bank against the loan will be Rs. 13, 493/- * 120 = 16, 19,220 of which 6, 19,220 will be the total interest that you need to pay to the bank.

Applicants who are not good at calculations or are looking for a much simpler way to find the best rate for a loan can use the loan calculator to get accurate results.

How to use loan calculator?

Loan calculator comes with a user-friendly interface and is extremely easy to use. All you need to do is to visit the official website of the particular bank from where you want to apply for a loan. search for the online loan calculator on the home page of the website and once you find the tool, you need to fill in some essential information related to the loan that includes:-

1. The principal loan amount that you want to avail (in Rs.)

2. The loan term (in months or years)

3. The rate of interest (in percentage)

4. Advance EMIs or EMI in arrears (applicable for car loan only)

5. Some loan calculator tool may also ask for the processing fee that the bank charges on every loan.

Upon entering these details in the loan calculator, click on “Submit” to get the results instantly. You can make as many searches you want using a loan calculator to examine the monthly EMI and loan amount that you can easily repay. Note that the use of loan calculator is extremely free of cost. Since it can be accessed online, it saves a lot of your time that you would otherwise spend in visiting the bank personally. Accuracy is yet another advantage of using loan calculators. So next time you apply for any loan, your first step will be to search results on the loan calculator and then visit the bank for further queries and apprehensions.
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