Getting a personal loan is a good way to tide over immediate cash requirements. There may arise an urgent need for money when you do not have access to cash or do not want to use your saved money to cover that expense.
The reasons may vary—urgent home repair work, a wedding in the family, or a medical contingency. In such a situation, a personal loan through an online loan app can come to your rescue. When seeking the right loan product to meet your needs, use a loan calculator for clarity on the various aspects of the loan such as EMIs and loan tenure. This knowledge will help you make an informed decision.
Here are some reasons why a loan EMI calculator is a very helpful tool:
Before taking the loan, calculate the EMI you will be paying
As the name suggests, this is the most basic purpose of a loan calculator app. Imagine a situation where you need a loan of Rs 5 lakh. The duration you are ready to take the loan for can be 2 years. In such a case, you must put in the amount you need to borrow, the interest rate and loan tenure in the EMI calculator, and it will show you the amount you will have to pay per month toward the loan repayment. It is best to have some padding in your EMI after you have decided upon your EMI amount.
Calculate your total borrowing capacity before you take out the personal loan
Before applying for a personal loan through an online loan app, it is important to know how much you can borrow. To know the answer, you must provide details of your monthly income, other loans and liabilities as well as your existing payment commitments. Using this information, the tool will tell you an approximate figure for how much money you can borrow and still have money left for your day-to-day expenses. If you know how much you can borrow, it will allow you to remain financially disciplined and not overleverage yourself.
Calculate how much money you actually need
One good aspect of a loan EMI calculator is that it helps you know how much money you need as a loan, helping you borrow only what you need and not over exceed your liabilities. Just because you can take a high loan amount does not mean you should take it. Remember, a part of the loan amount may get deducted as fees, taxes and processing charges. Using the calculator, you can arrive at the amount you need as a loan—no more and no less.
Calculate the time taken to repay your loan
The calculator tool is a very good choice for those who want to know how much time they will have to keep paying EMIs if they take the loan. Let us say that you need around Rs 1 lakh and you know that you can pay about Rs 5000 a month as EMI. By trying different combinations of the loan amount, tenure and EMI, you can find out the best plan that suits your needs. With this information in your reach, you can save yourself from taking very long-tenure loans or the ones with very high EMIs.
Calculate the amount of money that will go toward loan interest
At the very heart of a loan is the cost of capital that you borrow. You are essentially taking some money on rent from the lender and the interest is the proverbial rent that you pay to use that money. When taking big-ticket loans, it is very important to know how much you are going to eventually end up paying extra. This is very useful when deciding between taking a loan and using your savings to meet your financial needs. If the money you need is going to wipe out all your saving, you might be better off taking a loan even as your saving will give you some interest and thus, offset some of the money you pay off as interest to the lender.
An online loan calculator is a financial analysis and decision-making tool. It will provide a lot of information about the different quantitative aspects of the loan you are planning to take. While borrowing is not just pure maths, at the base level, the information provided by the calculator will allow you to find out which lender is giving you the best deal.