About the Personal Loan Calculator
Personal loans carry higher rates than secured borrowing because the lender has no collateral to fall back on. The instalment still follows the reducing balance formula, with the rate divided by twelve and the tenure counted in months. Where this page differs from a plain instalment calculator is the processing fee, which is usually deducted from the disbursal, so you repay interest on money that never reached your account.
The result separates four things a lender rarely presents together: the instalment, the total interest across the term, the fee in currency and the cash actually credited to you. Adding the fee to the interest gives the total cost of credit, which is the honest figure for comparing two offers. A loan advertised at a lower rate with a three percent fee can easily cost more than one at a slightly higher rate with no fee at all.
The affordability block converts the instalment into the income it implies at thirty and forty percent of monthly earnings, the range most underwriters treat as the ceiling for total debt service. Watch for extras that sit outside this arithmetic: some lenders add insurance premiums, tax on the fee, or a prepayment penalty of two to four percent if you clear the balance early. Read the sanction letter for those before signing. For a secured loan against property, the Home Loan Calculator handles the deposit and loan to value instead.
How to use
- Enter the loan amount you have applied for.
- Type the annual rate offered and the tenure in months.
- Add the processing fee percentage from the offer document.
- Compare the total cost of credit line across lenders rather than the headline rate.
Common questions
- Why is the cash received lower than the loan?
- The processing fee is usually deducted before disbursal, so you receive the loan minus the fee but repay interest on the full amount.
- What tenure is cheapest?
- The shortest one you can service comfortably. A longer tenure lowers the instalment but adds interest for every extra month.
- Can I prepay a personal loan?
- Usually yes after a lock in of six to twelve months, though lenders often charge two to four percent of the outstanding balance.
- How is this different from a credit card balance?
- A personal loan has a fixed instalment and end date, while card debt revolves at a much higher rate with only a minimum payment required.