Whether you are trying to save, invest, or borrow, undertaking financial planning is critical. In the context of borrowing, financial planning is essential to help make timely repayments, avoid missed EMIs, and minimise chances of loan defaults. All this becomes possible when you have an EMI calculator at your disposal. These digital tools help you estimate your payment obligations even before you actually apply for the loan. This article explores the importance of EMI calculators in financial planning.
How are EMI calculators important in financial planning
Here’s how an EMI calculator remains an indispensable financial planning tool:
Plan your monthly budget
An EMI calculator uses loan amount, tenure, and interest rates details to display your monthly payment obligation. It offers you a clear estimate of how much this loan will cost you in monthly terms. Let’s say, you are applying for a personal loan of Rs. 10 Lakhs at 12% p.a. for 3 years. Running these numbers through the EMI calculator shows you the monthly payment obligation as Rs. 33,214. Understanding this estimate allows you to factor it as an expense in your budget before you commit to the loan. It also helps you understand if you can actually afford the loan or if you should ideally borrow a smaller amount.
Create a customised loan repayment plan
If you are borrowing funds, you must have a solid repayment plan in place to meet your EMI obligations on time and repay the loan within the set tenure. In other words, creating a solid repayment plan is a critical component of financial planning. EMI calculators can help you achieve this goal. You can use these tools to experiment with different loan tenures options and review how your EMIs and total interest costs change with modifications to the loan duration. This flexibility helps you curate a repayment plan with the ideal tenure option that perfectly aligns with your financial goals.
Instant access to accurate results
If you wish to accurately plan your finances, you need to estimate EMIs correctly. Planning your loan repayments and budget with inaccurate estimates can derail your finances. An EMI calculator helps solve this issue with precise and accurate EMI estimates to help you plan loan repayment without risking any human errors. Moreover, using a loan EMI calculator also cuts down the time needed to draft an effective financial plan. Instead of manually computing EMIs – which would take you hours – you can simply run the numbers through the calculator and get instant results. With these instant and accurate results, you can streamline your financial planning efforts.
Effortlessly compare loan offers
Shopping around for the best loan offers is as important as looking for the best deals on various online marketplaces. Since lenders offer varying interest rates on loans, it is important that you compare loan offers before shortlisting one. EMI calculators help ease this process by offering instant comparison perks. Since you can use EMI calculators to run multiple simulations, you can input loan amount, interest rate, and tenure details for each lender and generate corresponding EMI details for the same. At the end, you can compare the results to see which bank or NBFC is offering a loan that matches your financial situation.
Ensure transparent financial planning
For effective financial planning, you also need to understand the loan repayment structure. EMI calculators are essential in this as well. When you run a simulation through an EMI calculator, you get a corresponding amortisation schedule. This schedule shows you how your EMI payments are broken down into principal and interest components over the tenure of the loan. Assessing this information helps you understand the amount of principal payment that’s outstanding and plan part-prepayments accordingly. Since making prepayments reduces the outstanding principal amount, which, in turn, lowers the interest on the loan, you can plan such early payments to become debt-free faster.
Conclusion
When applying for a loan, it is important to make informed borrowing decisions. EMI calculators help achieve this goal by fuelling effective financial planning. Using these tools effectively can help you better plan your budget, compare loan offers, draft a customised repayment strategy, and plan prepayments. Since EMI calculators are designed to compute EMIs in seconds with excellent accuracy, you can rest assured about the potency of your financial plan.