How to Use an EMI Calculator to Plan a Loan Of ₹5 Lakhs and Save

Be it for a medical emergency, to pay your child’s tuition fees or to renovate your home, you may be looking to apply for a quick loan of ₹5 Lakhs. While a personal loan makes financing your needs easier and faster, it is crucial to plan repayment smartly.

A great way to do this is to use an EMI calculator – a tool that you can use for free as many times as you want online. With its help, you can plan the EMI on a ₹5 Lakh loan, choose the right bank or NBFC to borrow from and even ensure that your loan amount is feasible.

Here’s how you can go about saving more on a loan of ₹5 Lakhs with an EMI calculator.

Choose An Offer With the Right Interest Rate

To reduce your EMI on a ₹5 Lakh loan, choose a loan deal with the lowest interest rate. This rate is a percentage calculated on the loan amount all across the tenure charged by lenders to offer you the facility to borrow. 

It varies across lenders. By choosing a lower interest rate, you will pay a lower instalment. You can use a tool like the Bajaj Markets: EMI Calculator App to compare the impact of different interest rates on your EMIs instantly.

For instance, here is how the EMI on a ₹5 Lakh loan for a tenure of 36 months will vary based on the rate of interest:

Disclaimer: The above values have been calculated using the Bajaj Markets: EMI Calculator App and are for representation purposes only. 

As you can see, opting for an offer with the lowest rate will reduce not only your total interest but also your EMIs.

Opt For an Ideal Tenure

It is crucial to understand the effect of your repayment duration on your EMIs to choose the most budget-friendly terms. A longer tenure leads to lower monthly instalments but higher interest payments overall.

A shorter tenure will increase your EMIs but save you interest. Using an EMI calculator will help make this abundantly clear. Consider the following example where the loan amount is ₹5 Lakhs, the interest is 10.50% and only the tenure varies:

Disclaimer: The above values have been calculated using the Bajaj Markets: EMI Calculator App and are for representation purposes only.

Also, keep in mind that lenders often charge a higher interest rate when you choose a longer tenure to mitigate their risk. Consider the final interest rates before you make your final decision.

Plan Prepayment to Maximise Savings

Most EMI calculators also give you a loan amortisation schedule, which contains details of your principal balance, interest due and other details when every EMI amount is paid.

Based on this, you can calculate the best time to prepay or foreclose your loan. Doing so helps you save on interest and become debt-free sooner. Consider this example of prepayment after 2 years and 3 years for a ₹5 Lakh loan taken for a tenure of 5 years.

Disclaimer: The above values are calculated using the Bajaj Markets EMI calculator and are for representation purposes only.

So, if you close your loan after 2 years, you will save ₹59,199 on interest by paying the outstanding amount. Comparatively, if you close your loan after 3 years, you'll save ₹28,294 on interest.  

With the schedule in hand, you can understand how much you will have to prepay and when you should do it to maximise your savings. Remember to consider the prepayment penalties or charges, if any, to get a more accurate understanding.

 Following these tips, choosing suitable loan terms becomes easier when you use an EMI calculator. One of the best ones you can choose is the Bajaj Markets: EMI Calculator App.

 Simply download it from Google Play to calculate your loan EMI for different types of loans and even compute your investment returns and insurance premiums. Get it now to have a financial planning tool at your fingertips!