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While servicing a loan, you need to pay equated monthly instalments (EMIs) to repay the amount borrowed. Knowing the home loan EMI you’ll need to pay beforehand, you can manage your finances better and ensure smooth repayment. This is why you must calculate the EMI before opting for a loan, especially for substantial debt like a home loan.
On the other hand, calculating EMIs manually is a tedious task and prone to errors. Thus, most banks and financial institutions in India offer a home loan calculator to facilitate EMI calculation for borrowers.
Top 6 Benefits of Using an Emi Calculator
A home loan EMI calculator has several benefits, and it helps in financial planning in the following ways:
Helps in deciding the Right Loan Amount
Home loan amount eligibility depends largely on the property valuation and the Loan to Value Ratio (LTV), this is decided by the lender. In India, with banks like ICICI Bank, you can qualify for a maximum of 90% LTV for home loans. However, just because you are eligible for a larger loan amount, does not mean you should not go for it. If you want to reduce the EMI and overall borrowing cost, you need to decide the loan amount carefully.
A home loan instalment calculator lets you decide how much loan amount you can afford and repay without defaulting. Note that if you opt for a bigger down payment, you can settle for cheaper EMIs and vice-versa.
Assists in Choosing the Tenure
The home loan tenure in India generally ranges from 5 to 30 years. Depending on your repayment capacity, you can choose a tenure which does not strain your finances. You can use a housing loan EMI calculator and put different tenures to determine which suits your credit profile.
Remember that a longer tenure may reduce your monthly instalments, but you end up paying more interest in the long run.
Chalks Out Repayment Journey
An EMI has two components, interest and principal, that needs to be paid in part every month. But did you know these components keep on changing with every EMI payment. For instance, in the initial years of loan tenure, the central part of an EMI constitutes the principal amount.
However, calculating every EMI and finding out its principal and interest components requires complex calculations. Instead, using a home loan EMI calculator, you can get a clear picture of the repayment schedule and plan your finances accordingly.
Helps in Prepayment Decision Making
Part-prepayment and balance transfer are the two most popular ways to reduce borrowing costs. However, choosing the right time to opt for any facility is crucial. Moreover, most financial institutions levy additional charges while offering these facilities. Thus, you must be diligent about when to opt for such options for optimum savings.
A home loan EMI calculator offers an amortisation schedule that lets you check the outstanding amount. After considering the remaining loan amount and the applicable charges, you can easily decide if opting for a part-prepayment or a balance transfer is feasible for you.
Finds the Best Lender
Home loan interest rates and EMI are directly related. Thus, to reduce the EMI burden, you must look for the best home loan bank offering competitive interest rates. A home loan EMI calculator comes in handy in this scenario. All you have to do is enter the details like loan amount, tenure and the interest rate offered by a particular bank or financial institution. Within seconds, you can know the EMI you must pay if you choose that lender.
However, besides EMI payable, several other things also factor in while making a borrowing decision, like the lender’s reputation, applicable terms and conditions, additional charges, etc.
Gives Accurate and Fast Results
One of the benefits of a home loan EMI calculator is its accuracy, ease of usage and quick results. Moreover, this automated tool is free to use and widely available online. Its 100% accurate results will help you make the right financial decision.
While these are some of the ways a home loan EMI calculator helps in your financial planning, you must know the method or steps to use this online tool.
How Does a Home Loan Emi Calculator Work?
A home loan EMI calculator follows the basic formula to calculate monthly instalments.
Equated monthly instalment = [P x R x (1+R)^N] / [(1+R)^N – 1]
Here, P denotes the principal amount, R denotes the rate of interest, and N denotes the tenure of the loan.
Following are the steps to operate a home loan EMI calculator –
- Visit the website of your preferred lender.
- Go to the home loan section and select the home loan EMI calculator from the tools menu.
- Put the loan amount you want to borrow.
- Enter your preferred tenure.
- Finally, enter the home loan interest rate offered to you.
- Click on the ‘Calculate’ button.
You will see the EMI outgo, total amount payable and interest payable in no time. Now you can put in different loan amounts, tenure and interest rates to settle for the best combination for you.
For instance, a borrower wants a home loan of Rs.35 lakh for 10 years at an interest rate of 7%. The EMI he has to pay is Rs.40,638. The interest payable would be Rs.13,76,556, and the total amount payable would be Rs.48,76,556.
Now, if that person increases the tenure to 20 years, keeping other inputs the same, they have to pay an EMI of Rs.27,135. The interest payable would be Rs.30,12,511, and the total amount payable would be Rs.65,12,511.
All these calculations took only a few seconds while using a home loan EMI calculator. It pretty much sums up why this tool is so popular among borrowers.
I am Zoya Arya, and I have been working as Content Writer at Rananjay Exports for past 2 years. My expertise lies in researching and writing both technical and fashion content. I have written multiple articles on Gemstone Jewelry like moonstone jewelry and other stones over the past years and would love to explore more on the same in future. I hope my work keeps mesmerizing you and helps you in the future.