The term ‘equated monthly instalments’ or EMI has become a household term these days. The prime explanation behind this common notion is the availability of exclusive loan facilities that a household or a professional can afford in this era. Be it a professional reason or a personal one, availing loans from a lender or a lending institution is easier these days. Planning for a loan term has also become more convenient when you use an online EMI calculator for credit card loans.
Using an EMI loan calculator, you can find out the equated monthly instalments you have to pay based on the loan amount and tenure you have decided to procure. The EMI amount will depend on the principal or loan amount, tenure, and the rate of interest fixed by the lending institution. You can decide how to pay back the loan amount and approach a bank or a lending institution to get it done. Using the EMI calculators will make your job more convenient. One of the proposed ways of taking a loan is by issuing a credit card and paying the EMIs through it. There is a conflict among the experts whether using a credit card to pay a loan and paying the stipulated EMIs is beneficial or not. Let us find out.
What does it mean Paying EMIs with Credit Card?
A loan can be issued with a stipulated EMI plan. The EMI can be paid using the credit cards you own. The prime issue in this aspect is that you will have to remember your card limit. An excess transaction crossing the fixated limit might charge you a penalty fee. On the other hand, issuing a loan and planning to pay the EMIs using a credit card will also impose a higher interest rate in a cumulative way. It means that you will not only have to pay the interest rate on loan to a financial institution but will also have to incur the interest rate issued on the credit balance you used.
When you need more cash and the credit card withdrawal limit is insufficient to serve the purpose, you can take a loan from a financial institution and pay it back using your credit card. The interest rate is higher than a standard personal loan but comparatively manageable. The money is disbursed directly to the account or as a demand draft. You can use an EMI calculator for credit card loans and find out the amount you have to pay every month easily.
How to calculate EMI for Credit Card Loans with a Simple Calculator?
The formula to calculate the EMI amount against a credit card loan is the same as that of all the genres. Decide on the principal amount you want to ask from the bank and check the interest rate charged. Find out the best tenure plan you can go with and calculate EMI using an EMI calculator credit card loan.
Here are some of the ways that you can use an EMI calculator:
The formula to calculate an EMI on a stipulated amount is:
EMI = [P x R x (1+R) ^ N] / [(1+R) ^ (N-1)]
Let us explain the terms included in this formula.
P represents the principal or the amount you want to borrow from the bank.
R stands for the rate of interest the bank charges against the credit card loan you want to avail. In this case, the rate will be displayed as a yearly figure, but during the calculation, it will be reduced to a monthly figure to find out the EMI.
N represents the time you need to repay the loan amount. It is also termed as ‘tenure.’ To calculate credit card loan EMI using a simple calculator, the tenure will be changed into a number of months.
To understand the formula properly, let us consider an example and calculate the EMI on a fixated amount.
Suppose you want to apply for a business loan of INR 5,00,000 from an NBFC. The rate of interest is set to be 15% by the lending institution. The time you need to repay the amount is 2 years.
P = 500,000
The annual interest rate will be changed into a monthly rate.
15%/12 = 1.25% = R
Now, you will have to convert the loan tenure from years to months. So, 2 years become 24 months here.
N = 24 months
Putting the values in the formula, the EMI is:
EMI = [ 500,000 x 1.25/100 x (1+1.25/100) ^ 24 / [ (1+1.25/100) ^ 24 – 1 ]
Using a simple calculator, the EMI comes out to be INR 24,243.
Is paying Loan EMI through Credit Card worthy?
For an instant fund allocation, a credit card can be the ideal resource you can use. You can use credit cards to pay the stipulated EMI every month. Normally, the interest rate is a little higher than the conventional genres. To understand it better, you can use an EMI calculator displayed on the official website of the lenders.
Using a credit card to pay the loan, EMI can be an intimidating task. When you miss an EMI payment, the same figure will be added to the next month’s bill. This amount will be subjected to an escalated interest rate (loan interest rate and credit card interest rate) ranging from 24 to 36% depending on the interest rate charged by the lender.
Make sure that you know your card limit. Understand that issuing a loan and using a credit card to pay the instalments might cross the available cash limit. You will be charged if you spend more than the limit by paying EMI with it. The outstanding amount will be subjected to a penalty ranging from 1% to 5% of the excess. Apart from these drawbacks, quick disbursement and minimum documentation are the best benefits of seeking credit card loans. Use an EMI calculator for credit card loan online to plan accordingly.