How Does Money View Education Loan EMI Calculator Work?
You can repay your education loan via EMIs. This amount is usually a fixed or a variable amount. Your EMI will be calculated as per your loan amount and the interest rate levied on it. Your credit score will also play a significant role in processing your repayment tenure and the interest rate imposed.
The Money View education loan calculator is designed to provide an easy user experience. You can follow the steps below to know the EMI rate that you need to pay monthly.
Step 1: You can start the calculation by entering the amount that you have borrowed. Use the slider to adjust this amount.
Step 2: Use the next slider to add the levied rate of interest.
Step 3: Now, enter your repayment tenure. You can select it in months or years
Once done, the calculator will show you the EMI amount that you must pay. It will also show you the EMI repayment schedule.
Our education loan EMI calculator has features that make the calculation process easy and quick and error-free. If you wish to do more financial planning before applying for your loan, then this calculator will ease your task and let you do so effectively.
Education Loan EMI Calculation Formula
To calculate your EMI use the formula given below:
P x R x (1+R)N / [(1+R)N-1]
P - P stands for Principal Amount. It is the amount that you have borrowed.
R - R stands for Rate of interest that has been applied.
N - N stands for Number or tenure of repayment.
We will elaborate with an example. Let’s assume Mr. Ravi has borrowed an amount of Rs. 5,00,000 for his child’s education. The interest rate for the sanctioned amount is fixed at 10.5% and the tenure for repayment is 60 months.
So, in this example, Principal (P) is Rs. 5,00,000, the Rate of interest (R)is 10.5%, and the Repayment Tenure (N) is 60 months.
Before you proceed to calculate the EMI, do not forget to check the monthly rate of interest. The formula to calculate it is Annual Rate of interest/12/100 So, in our case, it will be 10.5/12/100 = 0.00875
Once your monthly interest rate is calculated, you can easily check your EMI per month. 5,00,000 x 0.00875 x (1+0.00875)60 / [(1+0.00875)60-1] = Rs. 10,747 You can use this exact formula to check the EMI for every type of loan and not just for an education loan.
Difference Between Flat Balance and Reducing Balance Interest Calculation
There are two ways by which an EMI is calculated. The two methods are as follows:
- The Flat Balance Method
- The Reducing Balance Interest Rate Method
The Flat Balance Interest Method: In this method, the interest amount that you need to pay is based on the total loan amount. The interest amount is fixed for the whole duration of the repayment tenure.
The Reducing Balance Interest Rate Method: In this method, the interest rate is based on the principal amount that is outstanding each time. So, instead of the interest rate remaining fixed on the full amount, it is calculated on the basis of your outstanding amount. As a result, the principal amount keeps decreasing as you keep making every payment. This method is usually used by banks to calculate EMIs. The Money View education loan EMI calculator is also based on this method.
Factors that Affect Education Loan EMI
There are various factors that can affect the EMI payments for an education loan. Read below to know more:
- 1. Credit Score and Rate of Interest
The three-digit numerical summary of your credit report is known as the Credit Score. The credit report displays your previous loan history, repayments, and your financial behavior. The higher the score the better are the chances to get a loan sanctioned without any challenges and at a lower interest rate. Any score above 700 is considered to be a good score.
Your EMI will be directly proportional to the amount that you wish to borrow. You must check it before getting the loan processed.
Repayment tenure is inversely proportional to the EMI. It means, if your repayment tenure is longer, then your monthly EMI will be lower and vice versa.