Whether an individual wishes to enrol his child on an expensive course in India or is keen to send him abroad for education, knowing about the funding requirement is essential. This will help aspiring borrowers to select the right loan, such as an education loan and plan its repayment accordingly. The repayment of a loan consists of two components – one is principal, and the other is interest. Individuals can calculate these figures manually or using a mortgage loan calculator.
How to calculate EMI on an education loan?
The Equated Monthly Instalments are usually fixed throughout the repayment tenor of an education loan. The interest component occupies a significant portion at the beginning of education loan repayment. Later, the principal shares a higher portion in an education loan repayment. Computing these figures beforehand will assist borrowers in planning their repayment so that they can manage their budget without any hassle.
An individual can calculate EMI on a study loan using the following formula:
EMI amount= [PxRx(1+R)^N]/[ (1+R)^N-1]
Here, the P, R and N denote the following:
P is the principal amount. This is the loan amount that an individual borrowed from a financial institution.
R is the interest rate charged by a financial institution on a loan
N represents the repayment tenor
These are variables, and the value of monthly instalments will change with alterations in any of these variables.
Note that EMIs are paid every month, and duration is evaluated in terms of the number of months. For instance, if an individual borrows an education loan against property of Rs.10 lakhs, at an interest rate of 12%, and the repayment tenor is 2 years, then the EMI will be –
P= Rs.10 lakh
R= 12/100/12 (Convert it into months)
N= 2 years or 24 months
EMI = [10,00,000 x 12/100/12 x (1+12/100/12^24] / [(1+12/100/12)^24-1]
Also Read: How Calculator Helps to Get Interest Rate
However, manual calculation often seems cumbersome and requires time and effort. In this regard, borrowers can use an education loan calculator to get almost accurate results on the EMI payable towards a loan.
How to use an education loan calculator?
Several financial institutions offer an education loan calculator to calculate EMI payables. Here is the step-wise guide to using this online tool:
Step 1: Individuals need to visit the official website of a financial institution where they want to avail this facility.
Step 2: Choose a suitable loan amount, tenor, and interest rate to get results on EMI payables, total interest and principal components.
What are the benefits of using an education loan calculator?
Individuals can enjoy the following benefits after using an online education calculator:
- Provides correct results
This online tool eradicates the chances of human error and gives borrowers accurate results on EMI payables.
- Saves time and effort
Using this online calculator, evaluating EMIs on education loans is easy and does not consume time and effort as it happens while executing manual calculations.
- Assist in planning finances
Individuals only need to enter a few details like tenor, loan amount etc., on an education loan calculator to know the cash outflow towards monthly instalments. This knowledge about the EMI payables assists borrowers to plan their repayment schedule accordingly and ensures efficient management of finances.
Financing a child’s education is expensive nowadays. However, the combined efforts of the Indian Government and the Ministry of Education have introduced several education loan schemes, such as the Vidya Lakshmi scheme and Dr Ambedkar Central Sector Scheme of Interest Subsidy, to make education affordable for students.
Alternatively, availing a secured credit like a loan against property from trusted financial institutions is also a viable option for financing expensive overseas courses.
Selected financial institutions offer a high-quantum loan against property for education at an affordable interest against meeting simple eligibility criteria.
Moreover, these financial institutions extend pre-approved offers to existing borrowers on secured and unsecured financial products. With these offers, eligible candidates can enjoy minimal documentation and ensure quick processing of application requests. Individuals can check their pre-approved offers by submitting their names and contact numbers.
However, before applying for such credits, check the list of documents needed to apply for a loan against property to avoid inconvenience later.
To conclude, knowing the procedure involved in the EMI calculation of an education loan will help borrowers repay their dues easily. To further streamline this process, one can use an online education loan calculator to get results in a few minutes.