## **The Best Tool For Loans: The EMI Calculator**

So, you have decided to take a loan. But what about the paying it back? How do you figure out what the EMI will be like? Are you sure you have chosen the right amount?

These are just some of the questions that will come to your mind when it comes to taking a loan for anything and, believe it or not, these are some of the most important questions that you need to answer. To pay the loan back you are going to have to pay EMIs (equated monthly installments) for a considerable period of time. You could use a pen and a paper to calculate this or you could use an EMI calculator.

An

The mathematical formula for calculating EMI’s is

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

Where

“P” is the amount that you want to borrow.

“R” is the interest rate per month calculated using the formula (Annual interest/(12X100))

“N” is the duration for which you want to take the loan. This is considered in months so for a 2 year loan, N will be 24.

The beauty of the EMI calculator is its simplicity. All you need to enter is the amount that you want to borrow, the interest rate and the duration of the loan and it, using a similar formula, will calculate your EMI within seconds.

Since many banks charge a processing fee too, which is generally a percentage of the loan amount, many EMI calculators allow you to enter that too.

Being such a simple yet powerful tool, the EMI calculator offers you lots of benefits. The most prominent benefits are:

All the calculator needs are 4 small pieces of information, the loan amount, the interest rate and the duration of the loan, to tell you the EMI. This can be entered easily and results gained in seconds. Even when you make a small mistake in entering the numbers, it is easy to correct.

Can you imagine going through the whole calculation only to realise that you made a small mistake somewhere which has now rendered your results pointless. This is one problem that you will not have with the EMI calculator since it is very accurate in its results.

Let’s say you entered a loan amount of Rs. 5 lakhs to be paid back in 2 years, but quickly realise that the EMI is too high. All you have to do is either reduce the amount or increase the payback period and you will have a new EMI momentarily. You can keep changing these details till you arrive at an EMI that suits you.

If you were to use a pen and a paper to figure out the EMI you would spend hours, if not hours, figuring out the EMI you can afford but with an EMI calculator the same thing can be done in minutes which means you have time on your hands to do other things that you might want to do.

One of the most basic steps of taking a loan is shopping around before applying for a loan. This shopping around, at some point of time, will mean that you need to calculate the EMI you will have to pay. That is where the calculator comes in because with it, the same calculation can be done in seconds and the decision on which bank to approach can be made in minutes.

Remember, whenever you decide on taking a loan, just looking at the best interest rate is not enough, you need to be absolutely sure of what the EMI will be so that you can adjust your monthly expenses accordingly and that is the reason why

These are just some of the questions that will come to your mind when it comes to taking a loan for anything and, believe it or not, these are some of the most important questions that you need to answer. To pay the loan back you are going to have to pay EMIs (equated monthly installments) for a considerable period of time. You could use a pen and a paper to calculate this or you could use an EMI calculator.

An

**EMI calculator**can be the best friend you’ll ever have when it comes to taking a loan because it tell you exactly what the EMI for your loan will look like. It can do this within seconds which means that you can avoid the most basic mistake of taking a loan you can’t afford to pay back.**How to calculate EMI’s**The mathematical formula for calculating EMI’s is

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

Where

“P” is the amount that you want to borrow.

“R” is the interest rate per month calculated using the formula (Annual interest/(12X100))

“N” is the duration for which you want to take the loan. This is considered in months so for a 2 year loan, N will be 24.

**How the EMI calculator works**The beauty of the EMI calculator is its simplicity. All you need to enter is the amount that you want to borrow, the interest rate and the duration of the loan and it, using a similar formula, will calculate your EMI within seconds.

Since many banks charge a processing fee too, which is generally a percentage of the loan amount, many EMI calculators allow you to enter that too.

**Benefits of the EMI calculator**Being such a simple yet powerful tool, the EMI calculator offers you lots of benefits. The most prominent benefits are:

**Easy to use**All the calculator needs are 4 small pieces of information, the loan amount, the interest rate and the duration of the loan, to tell you the EMI. This can be entered easily and results gained in seconds. Even when you make a small mistake in entering the numbers, it is easy to correct.

**Accurate**Can you imagine going through the whole calculation only to realise that you made a small mistake somewhere which has now rendered your results pointless. This is one problem that you will not have with the EMI calculator since it is very accurate in its results.

**Endlessly adjustable**Let’s say you entered a loan amount of Rs. 5 lakhs to be paid back in 2 years, but quickly realise that the EMI is too high. All you have to do is either reduce the amount or increase the payback period and you will have a new EMI momentarily. You can keep changing these details till you arrive at an EMI that suits you.

**Saves time**If you were to use a pen and a paper to figure out the EMI you would spend hours, if not hours, figuring out the EMI you can afford but with an EMI calculator the same thing can be done in minutes which means you have time on your hands to do other things that you might want to do.

**Makes comparisons easier**One of the most basic steps of taking a loan is shopping around before applying for a loan. This shopping around, at some point of time, will mean that you need to calculate the EMI you will have to pay. That is where the calculator comes in because with it, the same calculation can be done in seconds and the decision on which bank to approach can be made in minutes.

Remember, whenever you decide on taking a loan, just looking at the best interest rate is not enough, you need to be absolutely sure of what the EMI will be so that you can adjust your monthly expenses accordingly and that is the reason why

*EMI calculators*are important.