If you are planning to raise a personal loan for any amount then remember that your equated monthly instalment (or EMI) is contingent on two factors i.e., time duration and rate of interest. Among these two factors, amount of EMI is directly proportional to the rate of interest that the bank charges, and inversely proportional to the tenure of loan.
Let us understand this in detail here. Suppose, you want to raise ₹10 lakh to go on a vacation to the USA. Now, how much will be your loan EMI depends on the interest rate, and the loan duration.
For example, if interest rate is 10.5 percent then the EMI will decrease with rising tenure. If you repay the loan within one year, the EMI will be ₹88,148, shows the EMI calculator. As the tenure increase to two years, the tenure, of course, will reduce to ₹46,376.
When repaid in three years, the EMI falls to ₹32,502. When loan tenure is raised to four years, the EMI declines to ₹25,603 and in case of five years, the EMI falls to ₹21,493, reveals the calculation on EMI calculator.
Rate of interest
Likewise, if you decide to repay the loan in a fixed period of time, say 3 years, the EMI amount will fluctuate on the basis of rate of interest that the bank charges. In other words, higher the interest rate, bigger the EMI; and lower the interest rate, smaller the EMI.
For example, if you take a personal loan ₹10 lakh at 11 percent interest for a period of three years, the EMI will turn out to be ₹ ₹32,738. At 12 percent interest, the EMI for ₹10 lakh when repaid in 3 years jumps to ₹33,214.
(Source: livemint.com/loans/personal-loan-emi-calculator; ₹10 lakh is repaid in three years)
When the rate of interest spikes to, say, 15 percent, the EMI will also increase to ₹34,665. Alternatively, if the bank becomes generous enough to slash the interest rate to 9 percent, the amount of EMI will also proportionately decline to ₹31,799, the EMI calculator shows.
It is worth noting that the other two factors (loan amount and tenure) are kept constant at ₹10 lakh and 3 years in the above four scenarios.
If you too want to check various permutations and combinations in order to take a decision of opting for one bank over other, then it is recommended to use a personal loan EMI calculator. Almost all the banks carry an EMI calculator on their websites.
