What Are Benefits Of Using Loan Emi Calculator?

Loans are an important way for people and businesses to make an upgrade. Whether it is for purchase of a new house, consumer durable or vehicle or a business loan to expand the business, a loan is an important form of finance. Generally, the mode of repayment for any loan is through equated monthly instalments or EMIs.

One of the best ways to find out the instalment amount is by using a free EMI calculator tool on lender websites. There are several advantages of using this type of calculator.  

Following are the benefits of a loan EMI calculator:

1.     Easy to use:

A loan calculator is extremely easy to use. This is especially true for people who have never used a loan EMI calculator before. The calculator requires the three inputs:

Once these three elements have been keyed in, the calculator automatically calculates the instalment amount. The actual formula to calculate the instalment amount is not shown. The calculator automatically shows the instalment amount.  

2.     Free of cost:

Most of the lenders have an EMI calculator on their website available for free. It does not matter whether you are a customer of the bank or not, but the calculator is available for everyone as a resource on the bank website.

3.     Helps plan loan tenure:

One of the biggest benefits of the calculator is that it helps to plan the loan tenure. Most lenders allow the borrower to decide the loan tenure between a range that they set. The loan EMI calculator can be used to find out the relationship between the loan tenure and the monthly instalment amount. If you choose a longer loan tenure, then the monthly instalment amount is lower because the repayment has to be made over a longer period of time. This makes it easier to service the EMI. However, the total interest paid out on the loan is high because a smaller principal amount is paid every month.

On the other hand, if you choose a shorter loan tenure, the loan amount has to be repaid in a smaller period of time. This means you pay lesser interest overall, but your monthly instalment obligation will be quite high. You should choose this option only if you have a very high repayment capacity. You can also check the pre-payment or part repayment charges charged by the lender and then decide the loan tenure.

4.     Loan comparison:

A loan calculator can be used to compare the loans offered by different lenders based on their average lending rates given on their websites and the loan tenures available. Even though the final rate of interest available on the loan will differ from lender to lender, the range given on the website can be used to compare loan applications. You can make a loan application based on this comparison.

5.     EMI chart:

Some EMI calculators also offer an EMI chart or an amortisation schedule. This schedule shows the breakup between principal repayment and interest payment for each instalment. This helps to show the total interest paid every year for the entire loan tenure. This can help take important decisions such as deciding loan tenure.