What is a Personal Loan Calculator and How Does It Work?

You have decided to avail an instant personal loan but have you factored in the interest or how much do you have to repay every month? Here’s where a personal loan calculator can come in handy!

What is a Personal Loan Calculator?

A personal loan calculator is a tool that allows people to estimate their monthly payments, interest rate, and total loan amount. This type of calculator is generally provided by banks, credit unions, and other lending institutions to assist potential borrowers in understanding the terms of their loans and making informed financial decisions.

A personal loan calculator may produce an exact estimate of the monthly payments and total cost of the loan by inputting information such as the loan amount, interest rate, and payback time. This information can help with budgeting and debt payback planning. Understanding the notion of a personal loan calculator will help you make wise financial decisions and manage your personal debt.

How does a Personal Loan EMI Calculator work?

A Personal Loan EMI Calculator works by using a set formula to figure out how much you need to repay each month. You enter three main things into the calculator: how much money you want to borrow (the principal), the interest rate charged by the lender, and how long you want to take to pay back the loan (the loan tenure, usually in months). The calculator then uses these numbers to give you your Equated Monthly Instalment (EMI).

This EMI is the fixed amount you would need to pay each month, which includes both the principal amount you borrowed and the interest on that amount.

Formula to Determine Personal Loan EMI

Wondering how does a personal loan calculator work? Here’s the formula it uses to determine personal loan EMI-

EMI= P*r*(1+r)n / [(1+r)n  – 1]

Here, EMI is the Equated Monthly Instalment, P is the principal loan amount, r is the monthly interest rate, and n is the loan tenure in months.

Benefits of using a Personal Loan Calculator for EMI

The major benefits of using a personal loan calculator for EMI include:


It gives you the right estimates of how much you need to pay each month and the total interest you owe, based on the loan amount, interest rate, and repayment period.


It helps you in budgeting and financial planning by showing you exactly how much you need to pay every month. Moreover, when you know your EMIs upfront, you can then easily adjust your spending and savings accordingly.


With the help of a personal loan calculator, you can compare different loan options from various lenders.

Also Read : Why You Should Use Personal Loan EMI Calculators over Manual Calculations


1. How to use a personal loan calculator?

Using a personal loan calculator is simple. You input the loan amount you wish to borrow, the interest rate offered by the lender, and the loan tenure, and then the calculator computes the Equated Monthly Instalment (EMI) you would need to pay.

2. How accurate are personal loan calculators?

Personal loan calculators provide accurate EMI based on the information you input as they use standard mathematical formulas. However, actual loan terms and final amounts may vary slightly due to factors like rounding off of decimals or specific lender policies.

3. Do personal loan calculators consider fees?

Well, it varies from calculator to calculator. Some calculators include basic fees like processing charges, while others focus solely on interest and principal amounts.

4. Are personal loan calculators free to use?

Yes, personal loan calculators provided by banks, financial institutions, and many online platforms are usually free for anyone to use.

5. Can I use a personal loan calculator to determine my eligibility for a loan?

No, the concept of a personal loan calculator is to estimate EMI payments based on inputs such as loan amount, interest rate, and tenure. Hence, they cannot check your eligibility for a loan, which depends on other factors such as credit score, income, etc.

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