How is the Rate of Interest Calculated on Personal Loans?

The interest rate on a personal loan is defined as the amount a lender charges the borrower. It is generally a percentage of the principal loan amount. While applying for a personal loan, borrowers tend to choose a lender who would provide competitive personal loan interest rates. It is, after all, one of the important factors when it comes to availing of a personal loan.  

However, how is the rate of interest calculated on a personal loan? 

Lenders usually offer loans with a particular interest rate. This rate varies depending on various factors like the credit score of the customer, the principal amount of the loan, the tenure through which the loan will be repaid. A higher credit score, longer loan tenure, and a smaller principal amount will attract a lower interest rate and vice versa. 


The personal loan interest rate per annum is decided by the lender. It is, therefore, important to use the personal loan calculator to find out the amount that has to be repaid per month. 

You can avail a loan with the best personal loan interest rates from Finnable. They offer personal loan of up to Rs. 10 lakhs with a repayment tenure of up to 5 years.

Personal Loan Interest Rate

How to calculate your EMI amount with your Personal Loan Interest Rate

To know how to calculate your EMI using the rate of interest on a personal loan, you will need to follow a simple formula.

The rate of interest is calculated in the following manner: 

EMI= Px(R/100) x (1+ (R/100)^N / [(1+R/100)^N-1

EMI= Equated Monthly Installments

P= Principal amount availed

R= Personal loan interest rate

N= Tenure of the loan in months

For example, let’s assume you have availed a personal loan of Rs. 5,00,000 with a loan interest rate per annum of 15% for a tenure of 5 years.

Here; 

P= Rs. 5,00,000

R=15% = 15/100= 0.15 per month

N= 5 years = 5×12 = 60 months

Using the above formula, you can first calculate the amount of interest as:

5,00,000×0.15/12=6250

The EMI is the combination of the interest amount and the principal amount. 

Here, the principal amount is Rs. 6179.81 and the interest to be paid is Rs. 6250. Hence, the EMI would be Rs. 12429.81.

You can also use Finnable’s personal loan EMI calculator to find out how much EMI you would pay per month as well as the loan interest rate amount. 

Factors that affect Personal Loan interest rates

Personal loan rates are decided by the lender. However, there are a few factors that can help in getting the best loan interest rates: 

  • Credit score: A credit score is a three-digit number that determines your creditworthiness to the lender. A score of 750 or more gives the lender the confidence that the borrower will repay the loan on time. This high score can also influence the lender into lowering the personal loan interest rate as they can be sure that the borrower will not default on their payments.

  • Loan amount: With a high credit score, you can also negotiate in getting a high loan amount. This amount has a direct impact on the personal loan interest rate.

  • Loan tenure: The loan tenure is the period within which you must repay your personal loan. Usually, a shorter loan duration would mean that you will pay a higher interest rate. The opposite is applicable when you opt for a longer loan tenure. 

  • Repayment schedule: The repayment schedule is the number of times you repay your loan EMI. If your repayment schedule is frequent, the burden of interest decreases with every repayment. 

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FAQs

You can create your profile on Finnable either through the website or personal loan App which can be found on Google play store. The profile will require a few basic details about yourself. After that select your loan amount/ product and the terms or payment period. Finally upload your KYC documents like Adhaar, Pan card and bank statement and you are done.

Yes, it is possible to get an instant loan online. We do offer loans to customers who are 1st-time borrowers which may be customers without CIBIL score as well if it meets our eligibility criteria.

Once you complete the application process, you will be able to see the status. The Live status is updated in the app at any point. Loans get disbursed within 48 hours of the application being approved.

One can get an online loan of Upto Rs. 10 Lakhs

Once your loan is sanctioned, all you have to do is grant customer authorization for the EMI amount to get directly debited from your bank account. That way, you  won't have to worry about forgetting your EMI payments.

Depending on your CIBIL score and monthly income, the interest charged on the loan will be between 16% to 26%

As an RBI regulated NBFC, we are required to follow the procedures which include getting KYC documents from our customer’s. So, it is mandatory to submit documents to get a loan online.

Yes, extremely safe. Finnable is an RBI regulated NBFC

Yes, it is possible to foreclose or prepay an active Finnable loan. Foreclosing or prepaying means that one wishes to prepay the loan amount earlier than the loan tenure/period. This is allowed after 6 months of getting the loan.

Customer Service contact - makeiteasy@finnable.com (You will get a reply within 24 hrs)