How to calculate interest on a loan

Interest rates play a key role in deciding how much a loan will finally cost you. Whether it is a home loan, car loan, or personal loan, understanding how interest is calculated helps you plan your finances better and avoid surprises later.

Knowing how interest works becomes even more important when you are borrowing. This is where tools like an EMI (Equated Monthly Instalment) calculator become useful. They help you estimate repayments clearly before you commit to a loan. If you are exploring borrowing options, you can also check your pre-approved loan offer using your phone number and OTP and see what funding options may already be available to you.

Understanding interest calculations is essential for making informed borrowing decisions, especially when dealing with long-term commitments. An EMI calculator simplifies this process by doing the maths for you in seconds.

By using an EMI calculator, borrowers can better understand how their loan repayments are structured. The tool provides instant results, showing the monthly EMI amount along with a clear split between principal and interest. This clarity helps you assess whether the loan comfortably fits within your monthly budget. If you want to move quickly, you can also check offer in 2 steps and plan your repayments accordingly.

Personal loans, a prevalent financing option for a variety of purposes, are no exception to the imposition of interest. Borrowers must pay interest in addition to the principal amount borrowed. The interest on personal loans can significantly impact the overall repayment amount, making it imperative for borrowers to grasp the workings of interest calculations.

1. Credit score: Your credit score acts as a financial report card, reflecting your creditworthiness. Lenders typically offer lower interest rates to borrowers with higher credit scores, signalling a lower risk of default.
2. Income and employment stability: Lenders evaluate income and employment stability to determine your loan repayment capabilities. A steady income and a regular employment history may result in lower interest rates.
3. Loan repayment history: Loan repayment history can foretell future actions. Lenders look at your loan payback history to determine your reliability. A strong payback history, in which you consistently meet your obligations, might have a significant impact on the interest rate.
4. Relationship with your lender: Establishing a positive relationship with your lender is critical to determining personal loan interest rates. Making timely payments and practising good financial behaviour can help you build a rapport with your lender. This can result in securing lower interest rates.

Bajaj Finance offers personal loans ranging from Rs. 40000 to Rs. 55 lakh at competitive interest rates, helping borrowers meet a wide range of financial needs. To plan repayments effectively, you can use the Bajaj Finserv Personal Loan EMI calculator to estimate the total interest payable.

The calculator requires only a few inputs—loan amount, interest rate, and tenure. You can adjust the EMI to match your repayment capacity. It also shows a detailed breakup of principal and interest components, along with the overall cost of borrowing. Before applying, it is always helpful to check your eligibility for personal loan so you can borrow confidently and plan your finances with clarity.