How Do Personal Loan Calculators Work?

Today, personal loans have increasingly become a tool to meet diverse needs as they are easy to get and require no collateral. Added to this convenience is the option to apply online and get the loan approved and sanctioned in a few clicks, provided all conditions such as income and KYC are met.

Whether you wish to renovate your home, fund your child’s education or need cash urgently, personal loans can come in handy. But, it is equally important to understand your financial responsibilities before applying for a personal loan. This is where you can get help from a Personal Loan Calculator that is also available online and requires no additional cost or charge to use.

How can a Personal Loan calculator help

Before you begin with an online loan application for a personal loan, ensure you calculate the EMI amount. This will help you understand whether you would be able to repay the amount every month, taking into consideration your regular monthly expenses and investments. If not you may need to relook at your loan amount itself.

However, calculating EMI may be tiresome and complex if you are unfamiliar with the calculation process. This is when a personal loan calculator can come to your rescue.

  • A personal loan calculator can help you perform EMI calculations in seconds, saving time.
  • Since the chances of errors are minimal, these calculators generate accurate results.
  • You can plan your budget and repayment strategy and make financial arrangements accordingly.

Working of a Personal Loan calculator

The calculator is an online tool that assesses the monthly repayment amount to the lender. Once you clearly understand the EMI amount you must repay for a specific loan duration, it becomes easier for you to manage your finances.

Let us understand how a personal loan EMI calculator helps us calculate EMIs. Some of the factors the calculator considers to calculate your EMI are the loan amount, loan tenure and the expected rate of interest on the borrowed amount.

Once you know the amount you need to pay monthly, you can also work backwards and adjust the principal amount in case the EMI crosses your budget.

A personal loan calculator works on the following formula:

EMI=[P x R x (1+R)^N]/[(1+R)^ (N-1)]


EMI is the Equated Monthly Instalment

P is the principal amount

R is the rate of interest on the loan amount

N is the loan duration, the time within which the loan amount must be repaid.

Let us take an example to understand better.

Assume you have borrowed ₹10, 00,000 at a personal loan for an annual interest rate of 10.5% for 5 years. If you enter these details in the personal loan EMI calculator, an EMI of ₹21,494 will reflect within a second.

Moreover, a complete amortization schedule will be displayed on your screen for reference. The amortization schedule shows how the loan amount will be repaid over the tenure. To understand the amortization table, you must know that the EMI you pay comprises two parts – principal and interest. At the start of the repayment schedule, most of the EMI goes towards paying the interest payment. Gradually, the repayments reduce the interest component and increase the principal part.

Features of Personal Loan Calculator

Let us look at some of the important features of the personal loan calculator.

  • It is a paperless and time-saving tool that can give you results quickly.
  • The results generated are accurate, with almost no scope for error.
  • With the help of this calculator, you can easily compare different personal loan options available and choose the one that best fits your needs and budget before making an online loan application.


A personal loan calculator is an online tool to calculate the monthly EMI amount you must pay to the lender to repay the loan. The tool is highly convenient, quick and accurate. You can calculate your expected EMI by entering details like the loan amount, tenure, and interest rate.