How to use the Home Loan EMI Calculator
Accuracy with respect to the loan amount is one of the major concerns whenever you are looking forward to purchasing a home. This is mainly because one should be aware of the exact financial commitment they are entering into when taking a home loan. Once you have decided upon the loan amount, it is all the more important to find out the interest you are paying and the monthly EMI amount. Carrying out all these tasks manually with accuracy is quite difficult. This is where a home loan EMI calculator comes to your rescue.
What is a Home Loan EMI Calculator?
A house loan EMI Calculator is nothing but a tool that assists you in calculating how much the home loan will cost you along with the interest. The Calculator will even help you get a precise figure on the EMI amount you’re required to repay. Housing loans are usually availed for a longer tenure period. Therefore, using a home loan EMI calculator helps you to determine your financial outflow concerning the home loan. It will also assist you in building your budget while making you aware of your affordability.
By using the EMI Calculator, you can also compare different home loans offered by various financial lenders. Besides, you also get the freedom to adjust the loan repayment tenure as per your needs.
EMI Calculation Formula
EMI = P*r*(1 + r) n / { (1 + r) n – 1}
In the above equation,
- E is the EMI amount
- P is your principal amount
- R is the rate of interest applicable every month
- N is the home loan repayment tenure period
You must keep in mind that while the monthly EMI remains fixed, you will end up paying less towards the interest and much more towards principal repayment over a period of time.
Example of a Home Loan EMI Calculation
An EMI Calculator is quite easy to use. You just have to enter the principal loan amount, the interest rate and the loan repayment tenure period. Following this, the calculator will show the monthly EMI in addition to the borrowing cost and payable interest. This saves you from complex calculations and gives you a much more accurate result.
Let us consider a scenario wherein you wish to avail loan amount of ₹21 Lakhs. You are comfortable repaying the loan amount within the next 10 years at an interest rate of 14%.
Then, as per the EMI Calculator, you are required to make a monthly payment of ₹32,605 as your Loan EMI. In addition, you are also shown the total interest and the payable amount as ₹18,12,714 and ₹39,12,714 respectively.
Now that you have a clear idea of your EMI amount, you may choose to adjust the variable to arrive at a different EMI amount. If you prefer to lower the EMI amount, then you can increase the tenure or lower the loan amount to arrive at a more affordable EMI amount. This gives you the freedom to choose a lender who agrees to lend you the money on those terms.
What Should you Use a Home Loan EMI Calculator?
An EMI calculator helps you to:
- Compare different loan offers instantly
The house loan EMI Calculator is a good means for you to compare the different home loan offers available from financial lenders. All you have to do is enter the loan details and you can easily determine which loan is best suited for your requirement based on affordability.
- Getting a clear break-up
The Calculator not only provides the calculations for your home loan amount but also provides a detailed break-up of the costs involved. Therefore, in case you encounter any hidden charges, you can ask your respective financial lender about the same as you are already aware of the breakup of the entire cost involved.
- Choosing the appropriate loan repayment tenure period
You are now aware that the EMI is directly dependent on the interest rate and the loan repayment tenure period. Therefore, it is better to use a home loan EMI Calculator to determine your estimated EMI so that you can repay the loan amount within a time frame that you are comfortable with.
- Helps you manage your finances
By using an EMI Calculator, you can track your payments towards your housing loan every month. This in turn, will help you keep your budget intact. This will also help you in managing your other obligations involving investment and savings.
Factors Affecting Your Home Loan EMI
As the EMI depends mainly upon the principal amount, rate of interest and loan repayment tenure period, any slight change in any one of the variables can cause a change in the EMI amount.
Also, the exact home loan amount that lenders grant you also depends on your application and your financial standing such as: salaried/business, income, credit history, age, number of dependents, borrower’s asset, and more.
