Whether you have been browsing two-wheeler loans, three-wheeler loans, personal loans, or small business loans, you must have come across ‘EMI calculator.’ If you find it confusing to navigate EMIs and decide upon an affordable amount without affecting your monthly budget, you are not alone! Most loan buyers face the same difficulty.
However, before you directly use a loan EMI calculator, you must know the various factors that can decide your monthly pay. Why? So that you can save more, of course!
In an effort to clarify the subject, we asked our customers to send in their queries on EMIs. Our loan experts at Manba Finance have answered all the questions in great detail! So, read the FAQs on EMIs and make an informed decision today.
What exactly is EMI, and how does it work?
An equated monthly installment (EMI) is a fixed amount you pay each month to your lender until your entire loan is paid off. It combines the principal loan amount and interest applied to it. The EMI amount is calculated using a formula considering the loan amount, interest rate, and tenure. While lenders generally do not accept prepayment and foreclosure, they may sometimes comply upon special requests. In such cases, the EMI calculation may change based on the terms and conditions set by the lender.
What can lead to low or high EMIs?
Three main factors that directly affect your EMIs include:
- Principal amount: This refers to the loan amount that you borrow to make your purchases. The higher the loan amount, the bigger the EMI. The lower the loan amount, the smaller the EMI.
- Interest rate: Lenders decide the interest rate based on customer profile and market situation. A high interest rate will increase the total repayment amount, leading to higher EMIs. You can secure a lower interest rate by improving your credit score, increasing your down payment, or checking for special offers.
- Tenure: A more extended loan tenure guarantees lower EMIs but higher interest rates. However, if you opt for a shorter loan tenure, you will pay higher EMIs, but the interest rates will be relatively lower. The latter option is more beneficial in terms of savings. So, if you can afford it, it’s better to go for it!
Using the EMI calculator, you can use the above tips to try various combinations of principal amount, interest rates, and tenure.
What is the importance of credit score? Does it impact EMI?
Yes, your credit score can significantly influence your EMI amount. Lenders will assess your creditworthiness before approving and sanctioning your loan. Lenders will trust you if your credit score is high and offer the desired loan amount at lower interest rates. On the contrary, if your credit score is low, lenders may charge higher interest rates to cover potential losses. Therefore, improving and maintaining a good credit score of 750 and above can help you qualify for lower EMIs and more favorable loan terms.
How does my loan eligibility affect EMIs?
Besides your credit score, factors such as your age and income can also affect interest rates and EMIs. Younger individuals with limited credit history and older individuals nearing retirement age are often considered higher-risk applicants by lenders. As a result, they may charge them higher interest rates. Similarly, borrowers with lower incomes may also face higher interest rates. As a result, these groups of people may have to shell out larger EMIs.
I did everything to ensure low EMIs, so why are they still high?
In this case, economic trends and market conditions could be the reason. When the economy grows, there is high inflation, causing lenders to increase the interest rates and vice versa during economic slowdowns. Hence, keeping yourself updated on these fluctuations can help you anticipate the ideal times for borrowing loans.
How to calculate EMI?
Manba Finance offers an easy-to-use loan EMI calculator. All you have to do is add your loan amount, annual interest rate, and tenure in months. Click ‘calculate’ and instantly determine your EMI. This way, you can decide on a suitable loan amount and repayment schedule that aligns with your financial circumstances.
You can use our EMI calculator:
- Bike loan EMI calculator
- Two-wheeler loan EMI calculator
- Three-wheeler loan EMI calculator
- Personal loan EMI calculator
- Small business loan EMI calculator
Do you have more EMI-related queries? Manba Finance will be happy to assist you! Contact us without further delay.
