You should always calculate the payable interest before applying for a personal loan. It will give you a complete picture of your future repayments and help you make the best investment decision. Whether you go for an online personal loan or approach your lender in their office, you can find out your personal loan interest beforehand. Use an online Interest Calculator for this or manually calculate with the help of an easy formula.
When you take out a personal loan from any recognized lending company, you are supposed to repay the principal loan amount with interest. The percentage of the interest is levied by your lender and depends upon multiple factors, which will be discussed later in this article. The entire payment of the loan, including the principal amount along with the interest will be made by you throughout an agreed tenor, usually through instalments or EMIs. Therefore, the interest on your personal loan is an important factor, as it will determine the total amount payable to your lender. With a simple formula of Interest Calculator, you can derive the interest for your availed personal loan.
But before getting into the formula, check out the different factors that influence the interest on personal loans.
- CIBIL Score
The CIBIL credit score reflects your creditworthiness. It can go high or low depending on your repayment history and financial background. Your payable interest depends on a good credit score.
- Loan Amount
The total interest payable to your lender is directly proportional to the applied loan amount, meaning the higher the principal amount, the higher will be your interest on the loan availed.
- Repayment Tenor
The repayment period will be inversely related to your personal loan interest. The shorter tenor you opt for, the lesser interest you have to pay.
The Formula
To calculate loan EMI and know in advance your interest, use the following formulae:
- To Find Interest Rate
I/Pt = r
‘’I’’ denotes the Interest amount, to be paid in a certain period.
‘’P’’ denotes the Principal loan amount.
‘’t’’ denotes the period specified in the loan agreement.
‘’r’’ denotes the Interest rate in decimal.
Put all the values to get the interest rate. However, you will get the result in decimal. So now you have to multiply it by 100.
- To find Interest Amount (paid in a specific period)
I = Prt
Whereas it is possible to manually determine the interest and monthly payments for your personal loan, you should use an online loan calculator to calculate loan EMI. Leading financial companies like Bajaj Finserv even offers a complete online personal loan facility, where you can check out the eligibility criteria, documentation requirements, loan interest, and other features before applying. You can even apply, manage your funds and application status on the go through their customer portal Experia. They also provide pre-approved offers on their several products, such as home loans, credit cards, personal loans, etc. Submit your name and contact details to get quicker access to funds.
Personal loans are unsecured in nature and thus entails significant interest charges. Whether you apply for an online personal loan or not, you should always calculate loan EMI and interest before applying. You should rely on an online Interest Calculator for deriving the accurate calculation for any complex loan.
