People borrow money when they need financial help. Depending on circumstances and available options, borrowing the right amount on the right terms can make all the difference. You’ll be surprised at the number of people who opt for loans that come with high interest rates, usually because they aren’t aware of the options available to them.
For instance, if you have a credit card from a reputable financial company, you can borrow against it and make credit card payments based on agreed terms. What’s more, using a credit card loan calculator can chart out your repayment before you even apply for a loan and help you manage your loan repayment better.
It is never advisable to obtain a loan without understanding the repayment costs and how they are calculated. A loan has three major components – the principal amount, the applied interest, and the number of months for repayment (tenure). These three components and other variables determine how much you pay and your overall financial outlook. In a nutshell, the repayment plan mainly depends on the monthly payments- EMIs.
What is EMI?
EMI stands for equated monthly instalment. It is the calculated amount of money you have to repay on your credit card loan or any other loan for that matter.
When someone applies for a credit card and is approved, they are typically offered various repayment options, one of which may include the option to convert a large purchase into monthly EMIs. Depending on your financial capacity, you can choose a suitable repayment plan. The lender might offer you a few options, and you can select one that suits you best.
How is EMI calculated?
There is a formula for calculating the EMI on your credit card. The formula can be executed manually, but this can be susceptible to error. It is best to use a digital or online credit card loan calculator to arrive at the correct figures for your credit card payment. Many credit card companies have online loan calculators that you can use.
To calculate your EMI before taking out a loan, simply enter the variables of your desired amount into the online calculator to get your repayment figures. Depending on the type of loans you are going for – home loan, car loan, personal loan, education loan, business, or loan against property – the online calculator will provide you with an accurate figure of your repayment amount.
When using an online credit card loan calculator, you must enter the type of loans you desire before putting in the variables to get the correct repayment figure. While an online calculator is better for EMI calculation, you may want to know the variables applied if a manual calculation method is to be used. The formula is:
- E – EMI
- P – Principal amount borrowed
- R – Rate of interest applied
- N – Number of months for repayment
The number of months for repayment is also called duration or tenure. To obtain the EMI on each credit card loan, the formula applied is: [P x R x (1+R)^N]/[(1+R)^ (N-1)]. Using this formula, you can easily obtain your EMI in a scenario where you borrow 100,000 lakh against your credit card at an annual interest rate of 15% for a tenure of 2 years (24 months).
Also Read: Introducing OneCard EMI
Variables that affect your EMI
Certain factors might impact your monthly repayments over time. Some of these are:
- Changes in the interest rates on loans (e.g home loan which is linked to the marginal cost of lending rates).
- If you are opting for preclosure of the loan.
- Flexible repayment schemes unique to certain types of credit card loans.
Credit card loan online calculators are best for managing your EMIs. The calculator provides you with an overview of your monthly payments and enables you to budget your finances accordingly. You can easily use these online calculators on the websites of credit card companies as many times as possible and for as many borrowing scenarios as you can imagine.
If you want to manage your credit card loans better, use online EMI calculators to get your repayment figures right.