Gratuity Calculator

The credit market in India is steadily on the rise. It is currently the 4th largest credit industry in the world, recording a CAGR of over 11% year on year. A vast majority of these advances are short-term credits such as personal loans and credit cards. Combined, these two financial products account for 78% of all credit lending in India. Loan repayments include EMIs and borrowers should consider the EMI amount to accurately plan their current and future finances.

There are several EMI calculators available online; one must choose an accurate EMI calculator and learn its usage to calculate the exact EMI amount they are liable to pay for a loan.

Factors Affecting Your Due Amount

There are certain factors you need to consider while planning for applying for a loan. Based upon your financial and repayment capacity, you will be required to calculate equated monthly installments (EMI). Here are a few factors to consider-

• Term of the Loan

A loan’s tenure may get reduced or extended. Subsequently, there will be an increase or a decrease in the EMI amount as well. Thus, considering the term of a loan is also an important factor that may affect your due amount.

• Rate of Interest

The rate of interest is a vital factor that will help to assess the installment amount owed. You can compare the product and opt for one which has a lower rate of interest so that your overall repayment stays low.

• Amount of Loan

Choosing the loan amount is another significant factor for determining your EMI. Based on the loan amount you choose, your equated monthly installment will be calculated accordingly.

How can an online EMI calculator help you?

The number of credit accounts is growing at an even higher CAGR of 28% and has reached 107 million accounts at the end of FY18.

Regardless of the type of loan you want to avail of, be it a secured or unsecured advance, it is paramount that you know how much monthly instalment you have to make before you avail it. That is where an EMI calculator in India can be immensely helpful.

• It helps you get an accurate estimate of your EMI amount so that you can plan your finances accordingly. Make sure that your debt-to-income ratio is below 50% to maximize your chances of loan approval.

• A loan EMI calculator helps you save valuable time. You don’t have to do complex calculations manually, which can be quite time-consuming.

• It eliminates any chance of a miscalculation, providing you with an accurate estimate every time.

• It is highly specific for each type of loan. The EMI breakup of a home loan, for example, is different from that of a personal loan.

The formula to determine loan EMI amount

There is a specific formula that Groww uses to compute the EMI amount for a loan.

EMI = [P x R x (1+R) ^N]/ [(1+R) ^ (N-1)], where –

• P is the principal amount
• R is the rate of interest
• N is the loan tenure

This is the standardized formula used by any online loan calculator. Some variables may be added based on the type of loan.