Personal loans are an important tool to bail you out of financial trouble. However, people tend to lose objectivity during a crisis, especially a financial one and make decisions that are not helpful. For example, when facing a financial crisis, people just decide to go for the lowest personal loan interest rate that is offered. However, if you ever face such a situation, remember that apart from the personal loan interest rate, you should also know the tenure of loan, EMIs, and also the method by which the EMI is calculated. So, how many methods are used to calculate EMIs, and which method is best for which type of loan? Here is the answer:
Flat Interest Rate
EMI is calculated based on two methods: Flat interest rate method and reducing balance method. The flat interest rate method is best suited for loans such as car loan and two-wheeler loans. However, the calculation of EMI for remaining type of personal loans falls under reducing balance method.
You can use flat rate calculators found online to determine the best EMIs for you. However, if you are feeling a bit old-school then you can use the formula given below to calculate the EMI based on personal loan interest rate. The formula is:
EMI = (Principal + Interest)/Period in Months
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So, the next time you face a financial crisis, ensure that you have all the required information. However, it is imperative that you do not avail loan at your nearest bank just because it is convenient. Banks generally better personal loan interest rate but their documentation process takes a lot of time. If you are looking for instant loans in a pinch then you should look no further than PaySense. PaySense provides instant personal loans without the never ending documentation process. Furthermore, if it is a question of convenience then you can download the PaySense app and get your loan approved as soon as possible.
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