Loans are instrumental in providing a reliable and solid option to people to save them from financial problems. There are a lot of reasons people apply for loans, one of the most common reasons is education. The cost of education in India is very high, and it is increasing on a yearly basis. The cost of education has risen rapidly over the last couple of years due to the increase in competition among the applicants and institutes. Additionally, the race among companies to hire the best has led to educational institutes adding various aspects to their curriculum that have further increased the cost. However, there is an easy way to deal with the rising cost of education that is education loan.
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Education loan is the amount provided to a student to complete his or her education. The amount includes all expenses related to the course being pursued by the student that includes but is not limited to aspects such as library fees, laboratory fees, travel expenses, and exam fees. However, there are a number of aspects of the education loan that sometimes confuse the applicants. The terms that an applicant should be aware of are:
Education Loan Amount: It is the amount that is borrowed from the lender.
Education Loan Interest Rate: It is the percentage of loan that the lender will charge to the borrower, expressed numerically as annual percentage.
Tenure of the Education Loan: The total duration of the loan.
Calculating Interest for Education Loan
One of the most important things that you need to realise with respect to education loan is that the rate of interest and EMI can be calculated through various tools. You can use online calculators to calculate the education loan interest or you can use a formula to calculate the interest rate and EMI. Additionally, you can also use MS Excel to calculate the education loan interest rate.
Calculating Education Loan Interest Rate Through MS Excel
If you were to calculate the EMI and education loan interest through MS Excel, then the first thing that you will need to do is open a MS Excel spreadsheet. The PMT function of the program is used to calculate the rate of interest and EMI. PMT uses the three terms explained above but the terminologies for the same are different in the program with respect to the PMT function.
The formula that you will need to use is: PMT(rate, NPER, PV)
In the above formula, interest on a monthly basis denotes Rate while NPER is the number of periods, and the present value of the education loan amount is denoted by PV.
So, how would it look for you if you were to use MS Excel? Suppose a guy named Rohan takes a personal loan of INR 4 Lakhs at an interest rate of 10% per annum. The tenure of the loan is 4 years.
In the above scenario, PV = 4 Lakhs, Rate = 10/12 (the annual rate divided by number of months), nad NPER = 4×12.
Thus, PV would be 400000, Rate would be .83, and NPER would be 48.
Then you will need to enter the values in the formula, it should look something like this: PMT(0.83, 48, 400000)
The result after the calculation would give you: INR 3,32,000
The result will be in a red color font and negative that denotes the borrower’s total outflow.
Calculating Education Loan Interest Manually
If you do not wish to use the online calculators or MS Excel, then you can also use a formula to calculate the EMI manually. The formula that you will need to use is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formulae, P is the Education Loan Amount, R is the Education Loan Interest Rate per month, and N is the Tenure of the Education Loan.
So, now you can calculate the rate of interest and EMIs for your education loan. Doing so will provide you valuable insights into managing your repayment. Furthermore, it will also help you with your overall financial planning. Thus, you will not be able to repay your loans in a timely manner but also understand your expenses for a month.
Instant Education Loan Online
The interest rate of education loan provided by banks is not very low compared to other loans. The reason for that is the level of uncertainity associated with the repayment of education loan. As a result, banks generally ask for an asset to be mortgaged as security. Thus, if you are unable to repay your education loan, you could face a lot of problems. Additionally, applying for education loan to banks can also be troublesome as the approval process for the loan takes a lot of time. It is even more problematic if the loan amount required by you is not too large. But now, you do not have to worry about such a thing because with PaySense you can get education loan up to INR 2 Lakhs instantly. Yes, you will not have to worry about the approval process nor do you have to mortgage anything. The rate of interest will also depend on a combination of factors such as your credit score, credit history, annual income, etc. Also, you can use the online calculator to ascertain your EMIs and interest rate. So, stop waiting and start downloading the PaySense Mobile App!
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