The EMI is determined by the amount of the personal loan, the term, and the interest rate. Interest rates change amongst lenders since different lenders offer loans at varying rates.
Here are banks offering lowest interest rate on personal loans.
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How is a personal loan calculated?
Personal loan interest rate is the monthly fee charged by a lender for borrowing money from them. A Personal Loan calculator can be used to quickly calculate the interest rate on a Personal Loan.
To arrive at the EMI, one has to input:
- Loan amount – It has to be between Rs 50,000 and Rs 30 lakh
- Tenure – The tenure has to be between 1 year and 5 years.
- Interest rate – It has to be between 1 percent and 50 percent.
Interest rates may vary across lenders as different lenders may offer loans at different rates. For the interest rate, input the rate at which your lender is providing you the loan.
The formula used for arriving at the EMI is: EMI = [P x R x (1+R) ^n] / [(1+R)^ n-1] Here, P= Principal loan amount, R= Rate of interest, n= Number of monthly instalments.
Assuming, P= Rs 3 lakh, R= 15 percent per annum= 15/12= 1.250 per month, N= 60 months
EMI =((300000*1.250/100*(1+1.250/100)^60/((1+1.250/100)^60-1))) = Rs 7,137
Documents required for personal loan
If you are an employed professional, you will need to submit your ID proof, address proof, and their latest 3 salary slips as income proof along with your employer information. There is no documentation process for pre-approved Personal Loans if you already a bank customer and KYC compliant.
Personal loan processing fee
While processing and sanctioning your loan, the bank incurs some administrative charges. This is often a minor sum that varies by bank and normally costs between 0.5% and 2.50% of the overall loan amount. Every bank establishes a minimum and maximum percentage of loan processing fees that must be paid by the borrower. You can pay this charge in advance or have it deducted from the loan amount when it is disbursed.