Personal Loan Guide: How to Apply, Calculate EMI & Improve Credit Score

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Discover everything about personal loans—how to apply, calculate EMIs, improve your credit score, and compare them with credit cards for smarter borrowing.

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Personal Loan Guide: How to Apply, Calculate EMI & Improve Credit Score

A personal loan is one of the most flexible financial tools available today. Whether you need funds for a wedding, travel, medical emergency, or home renovation, a personal loan can help you manage large expenses with ease. Unlike secured loans, it doesn’t require any collateral—making it a preferred choice for many.

What Is a Personal Loan?

A personal loan is an unsecured loan that allows individuals to borrow money based on their credit history and income level. The borrower repays the amount in fixed monthly installments (EMIs) over a predefined period, typically ranging from 1 to 5 years.

When Should You Apply for a Personal Loan?

You might consider applying for a personal loan when:

• You need urgent funds without selling assets

• Your credit card limit isn’t enough

• You want a lower interest rate than credit cards offer

• You prefer structured EMIs over revolving cards credit

Make sure to apply only when you have a stable income and a good credit history to improve your chances of approval.

How to Calculate Personal Loan EMIs

Before taking a loan, it’s important to calculate your monthly EMIs. Use a personal loan EMI calculator—an online tool where you enter the loan amount, tenure, and interest rate to get instant results. This helps you plan your finances and choose a repayment term that suits your budget.

Formula for EMI:

EMI = [P × R × (1+R)^N] / [(1+R)^N – 1]

Where:

• P = Loan amount

• R = Monthly interest rate

• N = Number of monthly installments

How Credit Score Affects Personal Loan Approval

Your credit score plays a major role in loan approval. A high credit score (750 or above) improves your chances of getting a loan at favorable interest rates. On the other hand, a poor credit score may lead to rejection or higher rates.

Tips to Improve Credit Score:

• Pay your credit card bills and EMIs on time

• Avoid multiple loan or card applications in a short span

• Maintain a healthy credit mix (secured + unsecured loans)

• Keep credit utilization below 30% of your card limit

Personal Loan vs. Credit Cards

While both personal loans and credit cards offer flexibility, they serve different purposes:

FeaturePersonal LoanCredit CardRepaymentFixed EMIsRevolving balanceInterest Rate10–18% p.a.24–36% p.a.Loan AmountUp to ₹25 LakhsBased on card limitBest ForPlanned expensesShort-term or emergency spends

If you have a large expense and want predictable repayments, a personal loan is better. But for smaller, frequent transactions, cards can be convenient.

Final Thoughts

A personal loan can be a helpful financial resource when used responsibly. Make sure to compare loan offers, check your credit score, and calculate EMIs before you apply. With proper planning, it can empower you to meet your goals without financial strain.