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Here’s Why You Must Use an Education Loan Calculator Before Taking an Education Loan

education loan calculator
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The Covid-19 pandemic keeps coming back in waves. From jobs to housing, the pandemic has had at least some effect on almost every major aspect of people’s lives. No one has been spared from the challenges imposed by the pandemic, including students. Though there is too much uncertainty around education abroad, one thing is certain: if you are planning to go for higher studies, you will most likely need a loan. An education loan is one of the easiest and most efficient ways of arranging money for education abroad or even in India. However, an education loan works differently than a normal loan. Therefore, students must understand the working of this type of loan before making an application for it. They must also understand their EMI obligation and avail of the loan only if they can afford it. An education loan calculator comes in handy in this regard. 

In this article, we will discuss everything you need to know about education loans and how to use an education loan calculator to make sure you are borrowing the right amount. 

How Is EMI Calculated?

Before we answer how an education loan is different from a normal loan, let us understand the concept of EMIs. All loans repaid in the form of EMIs. EMIs consist of two components: principal and interest. As the tenor of the loan advances, the principal component increases and the interest component goes down. 

EMI is calculate using the formula: P × r × (1 + r)n/((1 + r)n – 1)

In this formula, 

‘P’ stands for principal or the loan amount borrowed by an individual;

‘r’ stands for the rate of interest applicable;


‘n’ stands for the repayment tenor selected by the borrower.

This formula is used to calculate EMIs for a normal loan. However, since an education loan is different from a normal loan, this formula cannot be used to calculate EMIs for an education loan

How Is an Education Loan Different from Other Types of Loans?

An education loan is different from other types of loans in many different regards. Let us look at the differences. 

  • Education loans have a moratorium period. In the case of a normal loan, the borrower must start paying EMIs the month after they have taken off the loan. However, in the case of an education loan, students get a moratorium period. They are expect to start paying off their EMIs six months after their course. Some lenders allow students to extend their moratorium period to up to 1 year after the course has ended. Students often make the mistake of not discussing their moratorium period with their lender. Further, one cannot use the simple EMI formula to calculate EMIs on an education loan because the normal formula and the generic EMI calculators do not consider the moratorium period. 
  • Education loans are also different from other types of loans as different lenders charge interest on the principal amount and the interest using different methods. While some lenders calculate interest using the monthly compounding method, others prefer the annual compounding method. Those planning to take an education loan must talk to their lender and figure out how their lender will calculate interest and keep this in mind while calculating EMIs. 
  • Lastly, most lenders will not release the entire loan amount in one go. The money is release semester after semester. This, also, must kept in mind while calculating EMIs. 

Here’s Why You Must Use an Education Loan Calculator

Now that we know how education loans work differently than other types of loans, it is understandable that one must use an education loan calculator to calculate the EMIs on their education loan. One can easily find this calculator on a lender’s website. Let us look at some of the benefits of using an education loan calculator. 

  • The first reason why you must use an education loan calculator to calculate your education loan EMIs is that the calculator is quick and simple to easy. One look at the EMI calculation formula and you will realize that calculating EMIs is no easy task. Calculating your education loan EMIs is even more tricky as there are several different things one must keep in mind, such as the interest calculation method and the moratorium period. Therefore, it is best to rely on an education loan calculator. 
  • The education loan EMI calculator will tell you your EMI obligation in just seconds. If you feel that the loan you are opting for is drawing a very high EMI which you may not be able to afford in the long term, you should opt for a lower loan amount.  
  • Using an education loan EMI calculator is quite easy. Since the education loan calculator gives results in an instant and gives results so quickly, you can try different combinations to reach the value that will work best for you.
  • Lastly, as mentioned in detail in this article, an education loan works very differently from a normal loan. An education loan automatically takes into account the things that change for an education loan. Therefore, calculating EMIs using an education loan calculator requires one to simply input the required details. 
  • Lastly, when it comes to EMI calculations, manual calculations are prone to errors. An education loan calculator, on the other hand, can be trusted for accuracy every single time. 

If you are planning to take an education loan, it is highly recommend that you use an education loan calculator. Using this financial tool will allow you to make the right decision regarding how much to borrow.

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