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Learn How to Reduce Your Personal Loan EMI with this Calculator

how to reduce personal loan emi with a calculator

Are you planning to purchase a new car, renovate your house, or consolidate your loans? You might need a personal loan.

A personal loan is money you can borrow from credit unions, banks, or online lenders. Personal loans can be secured with assets or unsecured, making them more accessible.

Before requesting a personal loan, it is vital to compare your options and identify which loan suits you.

A personal loan calculator gives you an idea of how much the loan is going to cost you. This includes approximate monthly payments and total interest costs of the loan. 

How to Calculate Loan Payments

Paying back your loan depends on how much you owe and your repayment period. A personal loan calculator calculates your loan payment by dividing your total loan and interest by the number of months it will take you to repay. This will tell you your equated monthly installment (EMI)—the monthly payment you will make towards your loan. 

You enter the principal amount, loan term, and interest rate. The calculator divides the interest rate by 12 to get the monthly interest rate.

Your monthly payments remain the same for the entire loan term. However, the amount may change upon a deferment.

The loan deferral allows you to take an agreed break from paying the loan. This can happen if you have financial hardship contributed by job loss, national disasters, medical emergencies, amongst others.

Interest Only Loan Calculator

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Understanding Your Personal Loan Results

Estimated APRs

APR stands for annual percentage rate. It shows the interest and additional charges, including origination fees you will pay annually on what you intend to borrow.

Most personal loans attract a fixed rate, meaning your interest rate and payment remains constant over the life of your loan.  

Total Interest

Total interest includes the total amount of all interests you will pay over the loan’s life. Taking a long time to pay your loan attracts more interest.

For example, you will likely pay less on a $3000 loan if you repay the loan in two years compared to repaying it in five years. Also, a borrower with a high credit score pays less interest than a poor credit score holder.

Monthly Payment

Monthly payment is the amount of money you anticipate to pay monthly, based on the loan amount, loan term, and your estimated rate. You are likely to spend less on monthly payments when you select a longer loan repayment term as a borrower. 

Total Principle

The total principle is the amount loaned out that you should pay over the loan term, minus the interest. If your credit score is high, you will possibly secure high loan amounts.

How to Prequalify for a Personal Loan

Most consumers across the credit spectrum can benefit from personal loans. However, you need to qualify to get one. You can do various things to increase your chances of getting loan approvals at an inspiring rate.

Below are some factors that creditors consider when you apply for a personal loan.

Your Income

Your ability to repay the loan is a significant factor that lenders consider before remitting a loan, especially your debt-to-income ratio.

This is the gross monthly income that goes towards loan repayments.

Credit Score

A credit score acts as a snapshot of your general credit history. The higher the credit score, the better chances you have of getting approved for a personal loan with a low interest rate. Always work on improving your credit score before you apply for a loan.

Credit Report

Despite credit score being important when applying for a personal loan, lenders also check for your credit report. The report helps financiers to be sure that you don’t have past negative issues that could affect their decision. 

Some credit report content might act as a red flag and make it hard to approve your loan; this includes bankruptcy, collection accounts, and foreclosure.

Other Personal Loan Calculators

Personal Loan Refinance Calculator

This calculator helps you see your savings on a refinanced personal loan. Always refinance your loan to get a lower annual percentage rate. A lower rate minimizes your monthly payment and the total interest, saving you money.

Credit Score Personal Loan Calculator

Credit score necessities for personal loans differ across lenders. Some creditors may give the first choice to debtors with excellent credit scores of 690 FICO.

However, other lenders can accept borrowers with bad credit below 630. The minimum credit score to qualify for a personal loan is mostly between 610 to 640.

Debt Consolidation Calculator

Debt consolidation merges your existing loans into one, preferably with a lesser interest rate and shorter payment time. This saves you time and money until payoff.

The calculator proposes the most pleasing way to merge your debt and estimate your savings with a debt consolidation loan.

Debt-to-Income Ratio Calculator

Your debt-to-income ratio displays how your debt piles up against your earnings. Moneylenders look at your DTI to make sure you can repay the loan.

Also, the debt-to-income ratio calculator divides all your monthly debt payments totals across monthly income, hence giving you a percentage.

Frequently Asked Questions

How Do You Reduce Personal Loan EMI?

Wondering how to reduce personal loan EMI? You can reduce your personal loan’s EMI by improving or retaining your credit score above 750.

How Long Does It Take for Lenders to Disburse the Personal Loan?

Loan disbursement takes a shorter time if you are a pre-approved client. You can apply and receive the money the same day.

Why Is It Essential to Have a Good Credit Score?

A credit score specifies your credit merits and your loan repayment abilities. It is possible to get loans at a lower interest rate if you have a good credit score.

Can DACA Recipients Get Personal Loans?

Personal loans for DACA recipients are available. However, numerous lenders consider DACA loans a high risk.

Can I Get a Personal Loan with a Minimum Salary of $13,000?

Yes, it is possible to get a personal loan with a minimum salary of $13,000. However, you may have to prove that you have a substantial cash reserve or other financial factors or you may pay high rates for your loan. 

What Is the Personal Loan Interest Rate for Senior Citizens?

Senior citizens are normally offered preferential interest and lower processing fees on personal loans.

Final Thoughts

To find the best personal loan for your financial condition, be sure to shop around and relate fees, rates, and repayment terms from various creditors. Also, make sure to use a personal loan calculator to calculate the payments you’ll have to make so you can find a personal loan that fits your budget and goals.

Featured Image: Twenty20

About the author: I am a writer and an editor with experience in publishing, research, and SEO strategies. I have an honors BSc in Social Work from the University of Benin, Nigeria.

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