How Does an EMI Calculator Work for a Personal Loan?


For anyone who is taking up a personal loan for the first time, there is an accommodating tool called EMI calculator. It eases the process by predicting expected installments based on interest rates and loan durations hence providing a payment estimate.

EMI calculator helps borrowers to find out the expected monthly repayments for loans. These calculators are very common on banking websites, financial institutions’ websites, and online aggregators of loans as they are used by people from different countries for obtaining loans like home loans, personal loans, car loans, etc., and commonly by Kredit Bee EMI Calculator when looking for a personal loan. It uses such inputs as loan amount, interest rate, and tenure (loan duration).

In summary, this is typically how a personal loan EMI calculator works:

Loan Amount (Principal): Remember that this should also be filled with the value you want to borrow as your credit facility’s principal.

Interest Rate: The figure should be given in percentage.

Loan Tenure: This represents months over which you will pay back what was borrowed.

It calculates using a standard formula consisting of principal amount; interest rates and tenure of the loan. The formula itself is based on reducing the balance where interest is calculated on the reduced principal amount after each installment payment.

The formula for calculating your EMI is EMI = P x R x (1+R)N] / [(1+R)N-1]

​EMI is the Equated Monthly Installment

  • P is the principal loan amount
  • R is the monthly interest rate (annual rate divided by 12 and expressed as a decimal)
  • N is the number of monthly installments (loan tenure in months)

After entering the required details, the personal loan EMI calculator will provide the EMI amount you have to repay. It breaks down the installment into the principal and interest components. Some calculators also generate an amortization schedule, showing the repayment schedule over the loan tenure. This schedule details the principal and interest components for each installment and the outstanding balance after each payment.

Why Use an EMI calculator?

The use of EMI calculators has become increasingly popular in India due to several reasons. Financial experts suggest borrowers use it to be better educated when it comes to repayment. Most EMI calculators are available online and for free. Online access helps borrowers with a convenient way to estimate their monthly repayments before applying for a loan, also allowing them to plan their finances better. With the option of multiple loans from various financial bodies, EMI calculators make it easier to compare and contrast different loan scenarios quickly as there is transparency in loan calculations.

Generally, an EMI calculator is used during the pre-approval phase when people are exploring loan options. Being one of India’s preferred and safest loan platforms, KreditBee provides credit to first-time borrowers and those even with a low credit score. It is an RBI-registered platform backed by a systemically important NBFC. Therefore, it’s advisable to seek credit only from such RBI-registered entities and have a hassle-free borrowing experience.

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