# Calculate Personal Loan Interest Through Interest Calculator

Contents

### What is the interest on a personal loan?

A personal loan is an unsecured loan that provides a loan without any collateral or material assets as a guarantee. The interest is the amount received by the lender from the borrower during repayments so for the gratuitous act of lending money to the borrower in need.

An interest calculator comes in handy so that you can compare interests of different lenders before availing one for personal loan.

The interest rate is a percentage calculated on the principal amount or even for shorter periods of time. The rate of interest tells you how quickly those borrowing costs will accumulate over time

### What is an EMI?

Equated Monthly Instalment or EMI is the principal amount of the loan availed and the interest. An EMI is therefore equal to the principal amount of the personal loan plus the interest. Your EMI is usually fixed throughout the term of your loan, and it is repaid monthly over the term of your loan.

### Relation between EMI and Interest –

EMI and Interest rate is proportional to the principal amount borrowed. If you borrow a larger sum of money from the lender, the lender will charge you a higher interest rate. Also, the more you extend the tenor (the period after which you start to repay back your loan), the larger the EMI will be. In short, for pursuing an EMI that goes easy on you every month, you should avail a smaller loan amount, for a short tenor period, so that interest rate comes low.

### How is interest calculated?

The interest on a personal loan is calculated by an interest calculator. Through the Interest Calculator, the interest rate is divided by the number of payments to be made in future, and the total sum is multiplied to the principal amount.

The mathematical formula for calculating interest is: (Interest Rate / Number of Payments) x Principal Amount = The total interest paid.

If you’re making annual payments (interest rates are expressed annually), divide your interest rate by the number of payments you’ll make in the year. In other words, if you are making monthly payments, divide by 12.

### How is EMI calculated?

You can also calculate loan EMI using the information we already have. To calculate EMI, 3 things, basically the principal amount, the tenor period, and the interest rate is required. The mathematical formula for calculating EMI is as follows –

EMI = [P x (1+R)^N] / [(1+R)^N-1 ] ; where, P = Principal amount borrowed, R = Rate of Interest, and N = number of monthly instalments.

### How to get a lower interest rate?

A lower interest rate on your personal loan is very much dependent on your credit score and your CIBIL score. Your CIBIL score must be greater than / equal to 750. Higher the CIBIL score, higher is the chances you will get a low interest rate on personal loan. This is because a great CIBIL score proves the lender you are a responsible person when it comes to paying off your debts and managing your finances. Thus the lender can place his trust on you and offer a low interest rate.

### Why should you use an online Interest and EMI calculator?

* Super easy to access. All it takes is a google search away and the calculator appears within seconds.

* You don’t need to put your time and energy into calculating manually. All the work is done by AI

* Calculating EMI and Interest before availing personal loan online can help you distinguish a better loan offer.

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