Apply for loan on HIPL app available on Google Playstore Download Now

How Personal Loan Interest Rate Calculator Are Calculated?

Personal Loan
16 August 2024
Manya Ghosh
559

Table of Contents

Simple Interest Rate
Compound Interest Rate
Why Should You Use Interest Rate Calculators?

A personal loan is a credit amount sanctioned based on an interest rate that is to be paid till the loan tenure ends. The interest rate on a personal loan is determined by three major factors inclusive of credit history, monthly income, and repayment capacity. Borrowers holding a good credit profile usually get the best interest rates. A loan amount becomes heavier to repay by adding a percentage of interest. Hence, it is advisable to get a clear idea about the interest payable so that the loan amount taken doesn’t seem like a burden at a later stage.

Calculating interest is not a tedious task anymore, all thanks to the instant loan apps available for loan applications digitally. The interest rate charged may be fixed or floating, depending upon the loan type you have applied. Use the interest rate calculator to easily calculate the interest in no time or go the manual way using the below simple interest formula:

Principal Loan Amount X Interest Rate X Total Number of Years = Interest

INR 2,00,000 x 5% x 5 = 50,000 is the interest for 5 years

Interest rate calculator helps in the instant calculation of monthly instalments on your loan. This makes it easy to plan the repayment better.

Interest Rate Formula, There are different formulas applied to determine a rate of interest whether it is simple interest or compound interest:

Simple Interest Rate

P x R x T ÷ 100, where P = Principal, R = Rate of Interest, and T = Time Period of the Loan in years.

Compound Interest Rate

P (1 + r/n) ^ nt
P is the principal amount, r is the rate of interest per annum, n denotes the number of times in a year the interest gets compounded, and t denotes the number of years.

To Avail Personal LoanApply Now

Why Should You Use Interest Rate Calculators?

The loan interest rate calculator is one useful tool easily available on a financial institution’s website and app. As interest levied affects the repayment amount, the borrowers should make use of the interest calculator to get plenty of benefits:

Accessibility

The Interest rate calculator is not a restricted tool and can be accessed anytime and anywhere. Loan applicants don’t have to wrack their brains doing complex calculations manually.

100% Accurate Results

Error-free calculations are done in minutes. Depending upon the correct percentage of interest, accurate EMI results are derived at just one click

Saves Your Time

Saves your time from using complex formulas and lengthy calculations which may always not give accurate results.

Supports Financial Planning

Once you are clear about the interest rate, the EMI can be calculated by Online Personal Loan EMI Calculator which helps in monthly financial management.

Simplifies Decision Making

The EMI amount is derived considering the calculated interest rate that helps in faster decision-making for loan application and disbursal.
EMIs will vary depending upon the fluctuating market rate. Hence, choose a fixed or floating interest rate after careful examination of the market scenario.

Frequently Asked Questions

1. Where is the Compound Interest Formula Used?

The Compound Interest Formula is widely used in financial areas like Fixed Deposits, Savings Accounts, Mutual Funds, and Stock Market Investments to maximize returns. It also applies to Home Loans and other long-term loans, where interest accrues over time, increasing total repayment.

2. What does a low Interest Coverage Ratio indicate?

A low Interest Coverage Ratio formula (below 1) indicates that a company is struggling to pay interest on its debt and may face financial difficulties or risk defaulting on its interest payments.

To Avail Personal LoanApply Now

About Hero Fincorp

Hero Fincorp offers a wide range of financial products including Personal Loans for personal needs, Business Loans to support business growth, Used Car Loans for purchasing pre-owned vehicles, Two-Wheeler Loans for bike financing, and Loan Against Property for leveraging real estate assets. We provide tailored solutions with quick processing, minimal paperwork, and flexible repayment options for smooth and convenient borrowing experience.

Did You Know

Disbursement

The act of paying out money for any kind of transaction is known as disbursement. From a lending perspective this usual implies the transfer of the loan amount to the borrower. It may cover paying to operate a business, dividend payments, cash outflow etc. So if disbursements are more than revenues, then cash flow of an entity is negative, and may indicate possible insolvency.