What is an Education Loan?
An ‘education loan’ is a type of debt taken by students to pay for their education. The funds can be used to pay for tuition fees, hostel fees, and other expenses related to education.
Education loans are typically granted by banks, NBFCs, and other financial institutions.
However, the maximum amount one can borrow is capped at a certain percentage of their total salary earnings after completion of studies.
What is an Education Loan EMI Calculator?
An Education Loan EMI Calculator is a tool that helps you calculate the monthly installment of your education loan. It also allows you to calculate the interest rate of your education loan.
How to Calculate Education Loan EMI?
- Calculate the Loan Amount:
The first step in calculating EMI on your Education Loan is to calculate the loan amount, which you can do by multiplying the interest rate with the principal amount. The formula for this calculation is:
Loan Amount = Principal * Interest Rate / 100
So, if your interest rate is 10% and the principal amount is $150,000 then your loan amount will be:
= 150,000*(10)/(100) = $15,000
- Calculate the Duration of Repayment Period: After getting an idea about how much money you need to borrow, now you need to determine how many months it will take for you to repay this loan back?
To find out exactly how many months it will take, add one year of grace period (usually six months) into this calculation so that there are no surprises at the end of the repayment duration.
- Calculate Monthly EMI: Once we have determined our annual salary and tenure based on which payments are calculated, all we have left now is to find out what kind of monthly installments we would pay every month after taking into account our income tax deductions, etc – something called ‘monthly EMI’ or ‘effective monthly installment’.
How Does this Education Loan EMI Calculator Work?
The Education Loan EMI Calculator is a simple tool that helps you calculate your monthly installments for your education loan.
All you need to do is enter the amount of money borrowed, the interest rate on your loan, and the tenure of the loan. The calculator will then calculate your monthly installments based on that information.
Example of Education Loan EMI Calculator.
Let’s assume that you want to take a loan of $50,000 for your child’s education and you are applying for this loan in the month of July 2022.
The interest rate is 10% per annum on an unsecured basis and you have an option to repay this loan after 18 months with an option to extend it further by another 6 months at no extra cost.
In order to calculate the monthly EMI amount, follow these simple steps:
- Enter the principal amount in the ‘Principal Amount’ field: $50,000
- Choose your tenure from the ‘Tenure’ dropdown list: 18 Months (2 years). Tenure options include 5 Years, 7 Years, 10 Years, etc.)
- Enter your interest rate as % per annum: 20%. You can also enter any other number here if required i.e., 17% or 25%. If unsure about which one would be better suited then leave it as 20% since most banks offer loans based on this rate structure therefore chances of getting approved are higher when compared with others like 15%, 14%, etc.
Conclusion
We have explained the entire process of the education loan EMI calculator and its benefits. This calculator will help you to understand how much you need to pay each month.
Using this education loan EMI calculator, you can easily calculate your monthly installment amount.
FAQs
Are student loans interest-free?
No. Interest is charged from the day the Student Loans Company makes your first payment to you or your university or college until your loan is repaid in full or canceled.
Is it a good idea to take an education loan?
Yes, an education loan is a good idea and a commonly sought-after resort. Pursuing higher studies usually involves high fees and an education loan comes in handy at this point.
Can I take 2 education loans?
Well, the answer to the above question is – Yes, a student can be eligible for a second education loan. For this, they can either apply for a second education loan from the bank they already have taken their first loan from or they can apply to a different bank.
