How to Calculate EMI on Your Personal Loan?

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You can use the Personal Loan EMI calculator offered by BankBazaar to calculate the EMI you will have to pay. You will have to enter the loan amount, repayment tenure, interest rate, and the processing fee to know the EMI you will pay on a monthly basis.

Personal Loan Interest Rate

The personal loan interest rates range between 9.99% p.a. and 44% p.a. Depending on the loan amount availed by you, your credit score, and repayment tenure, the rate of interest on your loan is decided. If you maintain a high credit score and have a good relationship with the bank, then the interest rate on your personal loan can be lowered.

Formula to Calculate Personal Loan EMI

EMI = [PxRX(1+R)^N]/[(1+R)^N-1], wherein P represents the loan amount, R is the interest rate charged per month, and N indicates the total number of monthly installments.

Illustration

Mr. Mehta, a 33-year-old IT engineer, is looking to apply for a personal loan to pay for his wedding expenses. He intends to apply for a loan of Rs.10 lakh and repay the loan over a period of 36 months. He expects to pay an interest of 14% p.a. for the loan.

To calculate the EMI for the personal loan, he will need to navigate to either a bank/NBFC’s website or a third-party website that offers an EMI calculator tool. He will then have to input the loan amount, which is Rs.10 lakh, the loan tenure, which is 36 months, and the interest rate, which is 14% p.a.

Upon entering these details, the EMI payable, which is Rs.34,178 per month, will be displayed. In his case, the total payable interest is Rs.2,30,395, while the total payable amount is Rs.12,30,395.

The interest rate that applies on your personal loan is an important factor. In this page, we’ve put together some of the questions borrowers usually ask regarding their personal loan interest rates.

What are some of the other fees and charges levied by lenders?

Apart from your loan rate, there are a few other charges that form a part of your cost. These include the following:

Processing charges – for processing your application
Verification charges – for verifying your background and other parameters
Government taxes – for example, GST
Late payment fees – if you don’t pay your EMIs on time
Prepayment fees – if you want to prepay a part of your loan
Foreclosure fees – if you want to close your loan ahead of schedule

How is my prepayment fee calculated?

The prepayment fee is usually calculated in two ways:

As a percentage of the amount you want to prepay, or
As a percentage of the principal amount outstanding at the time of prepayment.

Some lenders may charge you a fixed fee for this facility.

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FAQs on Personal Loan Interest Rates

What is the lowest interest rate available on personal loans?PNB offer personal loans at attractive rates starting from 8.75% p.a. However, the interest rate may vary from customer to customer depending on certain factors, customer’s including credit profile and relationship with the bank, to name a few.
How does my income determine my interest rate?Your income denotes your capacity to repay a loan. A higher income shows that you have a better financial bandwidth to repay the loan on time. This means that your risk level is low. Lenders prefer individuals with low-risk profiles and may hence offer you a lower interest rate.
How do my employment history and experience play a role in determining the rate of interest?Working with reputable companies means that you are more likely to have a stable job and income. Your work experience shows work stability as well. This reflects your loan rate.
How does my credit score impact the cost of my loan?A good credit score indicates that you are responsible in handling your finances. This keeps your risk rating low. If your credit score is 750 and above, most likely you will be offered preferential rates.
How does my current debt level determine my interest rate?When processing your loan application, lenders will look at how much debt you currently have. If you’re spending most of your current income to repay existing loans, they may not grant you a personal loan. Even if they do, they will charge you a high rate of interest.
How can I get a good interest rate?If you have a credit score, preferably above 750 and are on good terms with the lender concerned, you might get preferential rates. Also, working in a well-known company and having a good credit profile may fetch you better rates.
Can I get an interest rate lower than what is advertised by the lender?Yes, you may be able to get an interest rate lower than what is advertised by the lender. This is where negotiation plays a vital role. If you’re able to negotiate well with the lender, you may be able to get a good rate.
Can I get a low rate of interest even if my credit score is bad?Yes, you may be able to get a personal loan for low cibil score. You can try and get a good rate by getting a co-applicant with good credit to apply along with you. Another way is to get a guarantor with good credit to back you up.
If I offer collateral, will it help me get a good interest rate?Offering collateral is another way to get an affordable rate of interest. Your rate is determined based on your risk level. Offering collateral reduces your risk level significantly as it serves as security against non-repayment. But do keep in mind that if you fail to repay the loan on time, the lender might take over your collateral.
Will I get a lower rate of interest if I take a loan from my existing lender?Having an existing relationship with a bank or lender is always beneficial. If you have a good relationship with your current banker, you’re likely to get better loan terms. For example, you may get a rate of interest better than what most others get.
Should I always choose the lowest available interest rate?The interest on the loan denotes the cost of your borrowing. Hence, it is always better to opt for the lowest interest rate available in the market when you’re applying for the loan. But keep an eye out for other charges levied by your lender.
How is the processing fee calculated?Different lenders charge varying processing fees. This is calculated either as a percentage of the loan amount you apply for or as a fixed fee set by the lender.
Can I avoid paying prepayment fees?The only way you can avoid paying this fee is if your lender waives it off or doesn’t charge you for making prepayments.
Should I prepay my loan even if I’m charged a prepayment fee?This depends on whether you can make up for paying the fee. Prepaying your loan will help you save on interest costs. Prepayments reduce your outstanding principal, which in turn, reduces the interest cost. Compare and see if the prepayment charges are lower than the interest amount you save. If yes, then it makes sense to prepay and terminate your loan faster.
How much will I have to pay if I miss paying an EMI?Your lender will charge you a late payment fee if you fail to pay your EMI on time. This fee will be mentioned in your loan document. Apart from this, you may also have to pay a penalty for late payment.
Can banks change the interest rate during the loan tenure?If you opt for a personal loan with a fixed interest rate, there will be no changes to the interest rate during the loan tenure. If you opt for a floating interest, the bank may change the interest rate when the MCLR changes.
Are personal loan interest rates fixed or floating?You can opt for a fixed interest rate or floating interest rate, based on the options that are provided by the lender.
Should I take a loan from a loan provider that offers the lowest EMI?While the EMI is an important factor to take into account, you should also consider other factors such as the processing fee, tenure of the loan, interest rate charged, repayment options, reliability of the loan provider, etc., when applying for a personal loan.
How often does the variable or floating interest rate change?Banks will change the variable/floating interest rate each time the Repo-linked Lending Rate (RLLR) changes, as and when decided by RBI.
What is the average interest rate on personal loans?Most banks charge personal loan interest rates between 10.50% to 24% p.a. The interest rate that you are charged will vary based on a number of factors such as your credit score, your income, the company that you are employed with, your age at the time of applying for the loan, etc. Thus, make sure to compare interest rates of different loan providers before applying for a personal loan.
How do I benefit if the interest is calculated on a daily/monthly reducing balance?In the case of monthly reducing loans, the principal amount gets reduced each time you pay an EMI, and the interest will only be calculated on the outstanding balance. In the case of daily reducing loans, the principal gets reduced on a daily basis and the interest is charged on whatever balance is outstanding. You, being the borrower, stand to benefit if you opt for a monthly/daily reducing personal loan since the overall interest that you will have to pay will be less.
Is there any relationship discount on interest rates?If you currently have a good relationship with a loan provider, i.e. you are an existing customer of the bank/NBFC or you have availed a loan in the past for which all repayments were done as per schedule, you may be offered a preferential interest rate. However, this does not mean that all existing customers who apply for a personal loan will be offered a discounted interest rate.
How does balance transfer help you get a lower interest rate?Personal loan balance transfer is a process by which the borrower transfers their outstanding loan balance from their current loan provider to a new loan provider. The primary benefit of doing this is that you can transfer the outstanding loan amount to a bank/financial institution that offers a lower interest rate, thereby reducing the overall interest that you will have to pay during the loan tenure.