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Personal Loan Calculators Explained
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A personal loan is a loan which does not need a collateral. This loan has various uses such as for education, marriage, financial emergency, etc. This loan is very helpful as it is a quick way to get money. However, you need to do financial planning before taking a personal loan. A personal loan calculator is your best friend when it comes to financial planning for taking a personal loan. Your lender will have a personal loan calculator on their website. This Loan calculator has sliders which consist of the loan amount, loan tenor, and interest rate. Based on those three criteria, the lender will calculate how much money you will have to pay back to the lender on a timely basis. These timely payments are called EMIs (Equated Monthly Instalments).
While using a personal loan calculator, there are certain criteria which have to be taken into consideration:
1.) Loan Amount:The loan amount is the sum of money that you need to borrow from your lender to fulfil your need. The loan amount is the amount on which the interest is charged. You must think twice before choosing a loan amount and whether you will be able to repay it or not.
2.) Tenor: The time period given by the lender to repay the loan amount is called Loan tenor. Loan tenor ranges from one year to 20 years. You must choose wisely before deciding upon your loan tenor and also make sure that after you deduct your expenses from your income, you will be able to repay the EMIs.
3.) Interest rate: Interest rates are fixed by individual lenders but differ from lender to lender. Interest rate remains the same through out the loan tenor. The major amount goes towards interest rate and less towards the principal amount during the beginning of the loan tenor. However, the transfer is reversed as the loan tenor progresses.
A personal loan calculator can be effectively used for better financial planning and to make better financial decisions before applying for a personal loan.
Benefits of personal loan calculator:
1.) A personal loan calculator has the option of choosing different values and customising a plan which suits your income the best.
2.) It is best to check your eligibility through the personal loan calculator and if you will be able to pay the EMI and manage other expenses. This is because if your lender rejects your loan
application, then it can reduce your credit score. Your credit score decides whether you are eligible for getting a loan or not. An ideal credit score is 750. When you pay back the EMIs for your loans on time, your credit score improves when you repay EMI on time. On the one hand, banks may not consider if your credit score is less than 750, but NBCSs (Non-Banking Financial Companies) might consider it. Hence, maintaining your credit score is also of utmost importance
Personal loan calculators are provided on websites of banks and Non-Banking Financial Companies which help you in calculating your EMI and your eligibility for the loan you have applied for. Hence, you must do the thorough financial planning and make sure that your income is sufficient to pay the EMIs as well as manage your monthly expenses.
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