Personal loans are one of the go to loans for many borrowers as these loans are disbursed without any collateral. A personal loan is an unsecured loan offered by banks and non-banking financial companies (NBFCs) to customers to fulfil their personal needs. Personal loan can be availed for any reason including any purpose like vocational courses, home renovation, medical emergency, or to travel.
Interest rate on personal loan
Interest rate on personal loan will vary based on bank, cibil score, salary and age. Here are banks that are offering best rate on personal loan.
Charges on personal loan
Many banks charge on various services offered when sanctioning personal loan. Some of the basic charges include loan processing charges, verification charges, duplicate statement fees, and penalty on EMI defaults.
The lender may ask for a foreclosure charge if you want to close the loan before the tenure ends. The bank may charge a small prepayment/foreclosure fee of 2-4%.
Tenure of personal loan
The loan can be repaid over a period of 12 to 60 months, depending on the loan amount and EMI.
How is EMI calculated?
According to the HDFC Bank website, here is a formula to calculate personal loan EMI.
EMI is calculated using the formula: P x R x (1+R)^N] / [(1+R)^N-1]
P= Principal or your loan amount
R= Rate of interest
N= Tenure (loan term in number of years)
Your EMI includes two main components – principal and interest. In the early part of your tenure, the interest amount is higher and that becomes progressively lower. Towards the end of the tenure, the principal amount forms a large proportion of the EMI.
Please note that the EMI is determined by the amount of the personal loan amount, the term, and the interest rate. You may also use the Economic Times calculator, which will tell you how much EMI you must pay by just entering essential information.