Wondering if you should really bother to calculate your EMI before you apply for a loan? Here are the reasons that will help you make up your mind.
It’s safe to say that loans are the most popular financial products in the banking world today. Over the past few years, they have been diversified to meet a variety of purposes. A key common factor of any loan, as you may already know, is the EMI or Equated Monthly Installment. As a borrower, your EMI amount and tenure will pretty much set the tone for your loan repayment. So, whether you’re planning to go in for a Personal Loan, Home Loan or Car Loan, here are the reasons why you should first try and calculate your EMI before you commit to your loan decision.
Additional Reading: How Is An EMI Computed?
To first understand why you need to calculate your EMI, let’s first explain how you can calculate it.
Basically, your EMI is determined by three major factors;
- Loan amount – The sum of money borrowed
- Interest rate – Rate of interest as charged by the bank or lending institution
- Tenure of the loan – The approved duration over which you wish to repay the loan
Don’t worry; you don’t have to grab your calculator or notepad, we’ve made the calculation process very easy for you…
To keep up with the diversification of loans, we have an EMI calculator for each type of loan to make the process of calculation easy and hassle-free for you:
- Home Loan EMI Calculator
- Personal Loan EMI Calculator
- Car Loan EMI Calculator
- Education Loan EMI Calculator
- Loan EMI Calculator
Now that you know how to calculate your EMI, we’ll tell you why you should do it before going ahead with a loan of your choice.
Why calculate your EMI?
A loan is a debt you’ll have to repay, right? If you agree, then read on – you’re sure to find enough and more reasons to take your EMI amount seriously.
Additional Reading: Your Car Loan EMI Calculator Guide
Though the EMI may look like a small amount at first glance, it can really affect your finances over time, so it makes sense to know what to expect before you step into any loan. Figuring out exactly how much your loan EMI will cost as you move along your tenure will give you the clarity you need to decide how much you can set aside for savings and how much for other expenses. When it comes to Home Loans, EMI amounts usually are a big part of your monthly expenses. So, it’s always better to be clear about your future financial situation before plunging into it. What’s more? Calculating your EMI when you’re comparing loans may just help you save money, and that’s a deal nobody will refuse.
Additional Reading: Everything You Need To Know About Personal Finance Refinancing
What could go wrong if you don’t pay attention?
Let’s assume you decide to ignore the whole EMI calculation part and wrongly assume that your new loan’s EMI is going to stay the same without understanding that your lender has provided you with a convenient repayment option wherein the amount steps up every year. A year down the line, you’ll realise that your EMI has increased – and that’ll just be a rude shock.
It just makes sense to not only calculate your EMI beforehand but also understand what kind of repayment agreement you’re getting into. While you’re at it, you can also learn the differences between a pre-EMI and full EMI repayment scheme.
The bottom line is that an EMI may appear to be a small amount in the face of it, but due to its recurring nature and the factors that govern it, the EMI is a significant part of any loan agreement that deserves its fair share of attention.
Now that you’ve added the EMI calculator to your loan application checklist, care to check out some exciting offers on Personal Loans?