Monthly Repayment schedule
|Payment No.||Beginning Balance||EMI||Principal||Interest||Closing Balance|
What is Education Loan EMI?
In a world where there is much competition, one needs to be educated to excel. There is a high demand for quality education as everyone jostles for a successful life. Based on this fact, parents who desire the best education for their children irrespective of their circumstances couldn’t find a better gift for their children.
One of the great advantages of education is that it helps to advance a country. There is an increasing cost of education which makes it a bullfight to get admitted into any reputed institution.
For this purpose, one may experience paucity of funds. Therefore, taking an education loan plays a crucial role in such a scenario by helping to bridge the gap. Aiming for and fulfilling a good career is a blessing in itself. But one needs to take a smart decision by assessing and comparing the loans given by different banks.
Based on this, there is an EMI calculator. With an education loan, you would be able to build a good credit score. Early loan repayment also makes it easier for you to secure a personal loan, home loan, car loan, etc., in the future.
The EMI Calculator is comprised of a formula box and 3 sliders, i.e., Loan Amount, Loan Tenure, and Interest Rate. Once the details have been duly filled, the calculator will show the Equal Monthly Installment (EMI) amount that will be needed by the bank every month for debt repayment.
The formula for calculating EMI
The EMI Amount can be calculated using the mathematical formula: EMI Amount = [P x R x (1+R) ^N]/ [(1+R) ^N-1] with P, R, and N as variables. The implication of this is that the EMI value will change each time any of the 3 variables are changed.
Let’s expatiate on these three variables. ‘P’ represents the Principal Amount. This is the initial loan amount you get from the bank upon which the interest will be calculated.
‘R’ represents the Interest Rate set by the bank. N represents the number of years given for loan repayment. Since EMIs are remitted monthly, the time frame is calculated in the number of months. For instance, taking an education loan of Rs. 10 Lakh with an average interest rate of 12%, the estimated EMI will be: P = 10 lakhs, R = 12%, N = 24 months [P x R x (1+R)^N]/[(1+R)^N-1] EMI = [1000000 x 12/100 x (1+12)^24] / [(1+12/100)^24-1] EMI = Rs 47,073
How an EMI Calculator work
An EMI Calculator helps to calculate the amount payable monthly to the lender (Bank). Calculating the EMI applicable on your loan will require you to make use of the above sliders and altering the principal Amount (P), Time duration (N), and Interest Rate (R).
The following steps will help you to calculate your EMI Amount:
- Select the Loan Amount with your slider
- Use slider to select the Loan Tenure in Months
- Select the Interest Rate by moving the Slider
- Recalculate your EMI by altering the input sliders
- Instantly, the EMI will be calculated once the slider is moved
Principal Loan Amount: This is the initial amount you lent. The loan amount solely rests on your need and the loan purpose. The more amount you loan, the higher the EMI.
Tenure: This refers to the total amount of time specified for the loan repayment. The tenure is usually calculated in a month and not in years. So, two year tenure is equivalent to 24 months.
The Interest Rate: This refers to the amount of interest accrued on the principal loan. There is the varying rate of interest based on the loan type and the lender (bank) which authorized the loan.
The interest rate directly affects your EMI amount; therefore one needs to compare the interest rates of different banks before obtaining a loan.
Factors that Affects Education Loan
Some factors affect the EMI calculation. As EMI is hugely influenced by the principal amount, time, and interest rate, any variable changes can lead to a change in the EMI amount. However, one needs also to understand and identify the other factors that influence the amount of Education loan. Here are the requirements to qualify for the Education loan:
- The claimant must have an Indian citizenship
- The claimant must have a higher secondary level schooling certificate
- The claimant’s Class X, XII and graduation mark sheets must be readily available
- Additional documents are required by the bank such as an admission letter from the institution
- Fee arrangement from the Institution
- The institution needs to have the relevant government approval
- The income documents of co-applicant such as salary slips or income-tax returns (ITR)
Some banks could offer loans prior to one securing admission into the university. Based on the Reserve Bank of India (RBI) guiding principle, there are no age restrictions to accessing education loan.
Benefits of EMI Calculator
The Education Loan EMI Calculator is an easy tool for calculating whereby you only need to enter three values. The Education Loan EMI Calculator keeps you informed about what you are getting into such as the principal loan amount, interest rate and time you will spend in paying back. With this calculator, you will know how best to plan your budget.
Education Loan EMI Calculator – FAQs
Q1. What is the scope of an education loan? It entails the entire course fee (exam and term charges inclusive), accommodation fee and other miscellaneous expenses.
Q2. When will you commence repayment? Repayment generally commences at the completion of the course. Some banks provide even give a moratorium of 6 months after getting a job or a year after study completion. The period of repayment is usually between 5 to 7 years, but there could be an extension.
Q3: Will I be able to understand the amount payable after I repay a lump-sum amount of the principal during the loan tenure?
Yes. If you enter the details of outstanding principal and the time the bank stipulates for prepayment, based on this vital information the EMI calculator will calculate your outstanding balance out.
Q4: Can the EMI, calculated by the bank be different from that calculated by the EMI Calculator?
It may slightly vary as the EMI Calculator based its results on what you input which may be prone to error as against that of the bank. So, basically what you fill in is what you get.
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