Education Loan Calculator: Its Features, Benefits, Functions and More
A good education is important to get your dream job and lead a successful life. However, education costs are rising around the world. These rising costs mean that parents must start saving for their children’s education at a very early age. However, many families still struggle with a shortage of funds when paying for their children’s education. For many families, applying for an education loan is a necessary part of getting an education. There are many aspects to an education loan and they must be understood well to ensure that the right loan amount is taken and that repayments are made diligently. In such a scenario, an education loan calculator helps families know the exact amount of money they will be taking and paying back, and what calculations were used to arrive at these amounts.
What Is An Education Loan?
An education loan helps students meet the financial requirements of pursuing a degree. It can be used to complete your course either in India or overseas. The money borrowed is used to pay the course fee and other education-related expenses including accommodation, examination fees and other miscellaneous costs. There are two primary eligibility criteria to secure an education loan in India. First, you must be an Indian citizen. Second, you must have an official admission letter from a recognized educational institution. Currently, there are many lenders offering education loans in India. So, you have many options when selecting the right education loan for your needs.
What Is An Education Loan Calculator?
An education loan benefits many students. However, students and parents must consider the EMIs before applying for an education loan. EMI is Equated Monthly Instalments. These are the monthly payments the student will make to repay their loan, with interest. An education loan calculator helps students understand the three important components of EMIs: the principal, interest and tenure.
- Principal: The money borrowed by the student from the bank or financial institution.
- Interest Rate: The percentage charged by the lender on the education loan.
- Tenure: The timeframe within which the principal and interest should be repaid in full.
Students will pay EMIs every month for a fixed tenure and some education loans come with a fixed interest rate. So graduates will pay a fixed EMI throughout the repayment period. For these reasons, you must consider your ability to make EMI payments before getting an education loan. This is where an education loan calculator comes in.
An education loan calculator helps calculate the EMI of an education loan based on the details you enter. For example, you must enter the principal amount, the interest rate and the tenure period. The education loan calculator will then tell you the EMIs you must pay.
How Are EMIs Calculated By The Education Loan Calculator
If you do not use an education loan calculator, you must use the following formula to calculate your monthly EMIs manually:
[P x R x (1+R)^N]/[(1+R)^N-1]
Where:
P = the principal loan amount
R = the interest rate
N – the repayment tenure or the number of monthly instalments
Let’s try to understand this using an example. In this example, you are getting an education loan of Rs. 10 lakh. The repayment period is 60 months and the interest rate is 12%. If you follow the mathematical formula, you will be paying around Rs. 22,244 in monthly EMIs for 60 months.
Solving this formula with various factors once or twice is fine. However, you will be consulting different lenders when looking for an educational loan. Each lender will have a different education loan offering. This means you will have to spend a lot of time calculating the EMIs of different lenders.
It is entirely possible that you may get confused or make a mistake in your calculations when done manually. In this case, even a small mistake could impact your financial future. An easier and more reliable method is to use an education loan calculator, which is easy to use and available for free. With an education loan calculator, just enter the three components listed above and check your EMIs instantly.
Benefits Of Using An Education Loan Calculator
There are many advantages of using an education loan calculator. Let’s take a look at some of the most important benefits:
Saves Time And Effort
An education loan calculator can be used on the go. This makes it easy to calculate the EMIs instantly. Simply enter the principal amount, tenure and interest rate. The accurate result will be in front of you in a few seconds. This saves you the time that goes into doing manual calculations.
Accurate Results Every Time
Stress and distractions can lead to errors when doing manual calculations. In contrast, an education loan calculator has no room for error. Therefore, you get accurate results every time. This is important to plan your finances efficiently.
Better Financial Planning
Having a clear idea about your monthly EMIs helps you plan your finances properly. With an education loan calculator, you can calculate the amount you have to pay in the form of EMIs instantly. This helps you decide whether you can afford a loan and how an education loan will affect your financial situation. Additionally, it will also help you find the right lender.
Free To Use
Most education loan calculators are free to use. So, you can find one that works the best for you and use it endlessly. Furthermore, you can use them whenever and wherever you want, given you have a stable internet connection.
Conclusion
An education loan calculator can help you compare the details of loans offered by various lenders. Additionally, you can work out the monthly EMIs instantly to assess your ability to make repayments. You can then use the education loan calculator to find a lender who offers the right loan amount and terms and conditions for you. Visit Piramal Finance for more interesting and informative articles about how to use education loan calculators and other useful loan-related tools!