Personal loan: How can you use an EMI calculator to lower your instalment?

If you are planning to raise a personal loan and find the current monthly instalment too high for your comfort, you can work towards reducing it.

This requires proper planning and some calculation before you jump the gun. The most effective way to do it is to use the personal loan EMI calculator.

It is a great tool wherein you can enter three variables to find out your monthly instalment. If you want to reduce your EMI, you simply need to change the variables according to your convenience to bring down the monthly instalment.

Let us suppose you want to raise ₹10 lakh for 3 years and the bank is charging 10.5 percent interest on it.

Three variables are as follows:

1. Loan amount: Let us suppose, you plan to raise a loan of ₹10 lakh for three years. When you look at the monthly instalment ( ₹32,502), you realise that it is too big for your comfort, one of the best and most convenient options is to bring down your loan amount.

For instance, when you enter ₹9 lakh in the EMI calculator, you will realise that the EMI has come down to ₹29,252.

The more you bring it down, the smaller the EMI will be. If you are comfortable with only ₹8.5 lakh, the instalment will come down to ₹27,627.You can tinker with the loan amount in the EMI calculator to see the change in your EMI.

And if you can’t compromise on the loan amount, then the second-best option is to increase the loan tenure.

2. Tenure of loan: In this case, when the tenure is 3 years, the EMI is ₹32,502. However, when you increase the loan tenure to, say, 4 years, the EMI will decline to ₹25,603, shows the EMI calculator.

3. Rate of interest: Another way to reduce your monthly EMI is to look for a more affordable rate of interest.

For instance, in the above case, when the interest rate falls to 10 percent (which you may get at another bank), your monthly EMI will fall to ₹32,267.

In the EMI calculator, when you reduce the interest rate further to 9.5 percent, the monthly EMI will decline further to ₹32,032. 

(Raising a loan comes with its own risks. So, due caution is advised.)