How Does Interest Rate Affect Your EMI And How To Calculate It Using EMI Calculator?

The financial marketplace has become very competitive and each bank or NBFC offers loans with different features that you can benefit from. One such feature is the interest rate, which has a huge bearing on your EMIs.

The higher the interest rate, the more your monthly instalments will be and vice versa. While this rule of thumb is easy to follow, you may want to see exactly how a loan’s rate of interest impacts your repayment.

You can see this in seconds by making use of a digital EMI calculator. Here’s how it helps you compare loans and make sensible decisions.

Effect of Loan Interest Rate On EMI

When you consider the cost of taking a loan, it is what you have borrowed plus the interest. This interest is applied over the course of the tenure and may be fixed or floating.

When you sign up for a personal loan, for instance, your interest is usually fixed. So, if you borrow ₹30,000 for 18 months and your interest rate is 10.99% p.a., you will repay a total of ₹32,678 throughout the tenure. This includes the total interest of ₹2,678 and an EMI of ₹1,815.

Keeping all other thing the same, a lower interest rate will bring down your EMIs and a higher rate will increase it. Here is a table showing this correlation for a loan of ₹30,000 taken for 18 months using an EMI calculator.

Disclaimer: The aforementioned values have been calculated using the Bajaj Markets: EMI Calculator App's personal loan EMI calculator and are for indicative purposes only.

Form the table, it is evident that a lower interest rate attracts lower interest, leading to a lower cost of borrowing. So, it is ideal to opt for a lower rate to enjoy an affordable loan and a lower EMI amount.

However, to enjoy the lowest interest rate, you must meet the lender’s eligibility terms and showcase the ideal financial capacity. This is because lenders calculate your interest rate after analysing many factors.

Factors Affecting Your Loans Interest Rate

Here are the various aspects that affect the interest rate that you get.

Credit Score

Typically, lenders require a credit score of over 750+ when providing an affordable loan. With a good score, you can expect the most competitive interest rates as this means you are viewed as a trustworthy applicant.

Loan Amount

A higher loan amount can result in a higher interest rate as the loan provider undertakes a higher risk. Try to borrow only what you need and base the amount on your income.

As long as you can afford to repay the amount easily, you can get the loan, provided you meet the other terms. You can compute your monthly instalments for different loan amounts using the EMI calculator too.

Loan Tenure

Similar to the loan amount, a longer tenure can be risky for the lender. Thus, you may have to pay a higher interest with increasing tenures. The best way to proceed is to choose the shortest tenure you can afford by calculating your EMIs using an online EMI calculator.

Earnings and Debt

Sufficient earnings ensure you can repay on time. In the same way, having less debt obligations also showcases your capacity to repay. If your income is less and you have more debt, lenders compensate with a higher interest rate.

Relationship With Lender

If a lender already has your records and you have a past or existing relationship, you can get competitive interest rates. However, this depends on your dealings and maintaining a good record.

How to Use Bajaj Markets: EMI Calculator App

Using the Bajaj Markets: EMI Calculator App is very straightforward and involves the following steps:

• Step 1: Install Bajaj Markets: EMI Calculator App on your device
• Step 2: Launch the app to log in with your mobile number and OTP
• Step 3: Select from the loan type, such as Personal Loan, Business Loan or Home Loan
• Step 4: Enter your loan amount, tenure and interest rate by entering the figures or using the toggle
• Step 5: Change the values to get a suitable EMI option

Following these steps, you can easily compare the interest rates for your loan and see their impact on your EMIs. Using the Bajaj Markets: EMI Calculator App allows you to customise your loan terms and plan your repayment.

In addition to the EMI calculator, it also has an FD calculator, insurance premium calculator, SIP calculator and more. Download the Bajaj Markets: EMI Calculator App from the Play Store or App Store for better financial planning, all under one roof.