Planned expenses, emergencies, education costs, travel charges, or any other financial needs can easily be managed when you consider taking a personal loan. But the total borrowing cost is not just about the monthly repayments. The amount you finally have to pay also includes processing fees and applicable GST, which can significantly increase the EMIs. So, before making any decision, it is important that you make full use of personal loan EMI calculators.
Helping you get an estimate of your monthly instalments, an EMI calculator calculates the sum based on the loan amount, interest rate, and the repayment tenure. However, to get a complete idea, it is essential to understand the actual cost of a loan, including the applicable personal loan processing fees and taxes.
What Is a Personal Loan EMI Calculator?
An online tool helping borrowers get an estimate of their monthly repayments is considered a personal loan EMI calculator. Users typically are required to provide three details, such as the principal amount that you plan to borrow, the annual rate charged and the loan tenure.
Calculation with the help of an EMI calculator helps make the comparison of loan amounts and tenure easy and allows borrowers to understand if the EMI fits their budget or not.
However, the calculated EMI usually doesn’t account for all costs related to borrowing, such as personal loan processing fees and GST that require consideration.
How Do Processing Fees Affect the Real Cost?
For processing a loan application, lenders charge a specific fee. The percentage or amount may vary as per the lender, loan product, applicant’s profile, and other terms. Based on the terms and conditions of a lender, a personal loan processing fee can be charged at the start or deducted from the disbursed amount. This is why it is advised that borrowers must check whether the loan amount is the sum they are receiving or if there are any applicable deductions.
This distinction matters because a borrower may receive slightly less than the sanctioned amount while still having repayments calculated against the sanctioned principal, depending on the loan agreement.
What Role Does GST Play in Loan Costs?
When applying for a personal loan, you must know that GST does not apply to the personal loan principal amount and interest amount, but is levied on other charges. Users must verify the current terms of the lender before applying to understand the tax treatment and applicable rate. This is why borrowers should not consider just the personal loan processing fee, but also the GST cost.
How Can You Calculate the Real Cost of a Loan?
While you can only calculate an estimated amount with the help of an EMI calculator, you have to check the terms of the lender to look for additional charges. Here’s how you can calculate the actual cost of a loan:
- Enter the loan amount you are considering borrowing in the personal loan EMI calculator.
- Add the applicable interest rate offered to you by the lenders or the one you are evaluating.
- Consider getting two options by adding a shorter and a longer tenure, making the comparison easier.
- When you get the EMI numbers, understand whether it fits in your monthly budget.
- Look for how much processing fees are charged by the lender in their terms and conditions.
- Ensure you include the GST amount in the EMI that you have calculated, along with the processing fee.
- Don’t forget to check the loan agreement for any other applicable fees.
What Does a ₹5 Lakh Personal Loan EMI Depend On?
A ₹5 Lakh Personal Loan EMI is not the same for every applicant, as it primarily depends on the interest rates and repayment tenure. Choosing a longer tenure may reduce the EMI amount but increase the interest payable; on the other hand, a shorter tenure increases the EMI and decreases the interest payable.
Borrowers can see how EMI changes by adding different tenure options in the EMI calculator and making a comparison. This helps in evaluating the repayment alongside processing charges and the applicable GST amount. Finding the lowest EMI is not the main objective of an individual, but borrowers must take a look at the repayment structure that balances affordability with overall borrowing cost.
Final Thoughts
A personal loan EMI calculator is a useful starting point for understanding monthly repayments, but the EMI alone does not represent the complete cost of borrowing. Processing fees, applicable GST, interest, and other disclosed charges should also be considered before making a decision.
Platforms like Stashfin strive to make digital borrowing easy through zero-hassle service, round-the-clock funds, fully digital processing, instant approval, and quick disbursal, all without manual paperwork. Its digital EMI calculator assists borrowers in estimating repayments, comparing loan amounts and tenures, and planning their budgets prior to applying.
