A home loan is a huge commitment spanning decades, which is why it’s essential to get the right home loan from the start. Before getting a home loan, you need careful financial planning so that you don’t break your budget and have enough left over for your daily necessities after the home loan EMI each month.
A home loan EMI calculator is a great way to determine your home loan installments along with interest payable for a particular tenure.
How To Use The Home Loan EMI Calculator
Before we understand how to use the calculator, let’s understand what a home loan EMI calculator is.
A home loan EMI calculator is an online tool that lets you calculate your EMI based on the loan amount you plan to get. It uses a simple formula to give you a fairly accurate estimate of the interest amount and EMIs for your loan amount and tenure.
It computes your EMI using the following formula:
[P x R x (1+R) ^N]/[(1+R) ^N-1],
- P means the principal loan amount
- R is the rate of interest
- and N stands for the number of years
All these three elements are variable, meaning you can change any of these values to determine how much EMI will fit your budget. For example, if you avail of a loan of Rs. 10,00,000 at an interest rate of 7.5% for 15 years, then your EMI would be:
EMI = ₹10,00,000 * 0.00625 * (1 + 0.00625)180 / ((1 + 0.00625)180 – 1) = ₹10,270.
Five Major Advantages Of Using The EMI Calculator To Calculate Home Loan EMI
Almost every lender offers a home loan EMI calculator on their website. You can use it to calculate your monthly installments by entering your estimated loan amount and interest rate.
Here are some more benefits of using the EMI calculator:
Accurate Calculations
The loan EMI calculator lets you enter as many permutations and combinations for the loan, interest rate, and tenure to compute your EMI using different scenarios. Doing such calculations manually is difficult and leaves room for errors.
Using the computerized loan calculator on a lender’s site gives you an accurate estimated amount for your EMI payment.
Easy To Make Comparisons
Each loan scheme is different. For example, some options let you choose a tenure that is as long as 30 years, while some schemes have a lower interest rate for certain borrowers. It’s essential to compare all loan schemes from reputed lenders so that you can get the best loan offer.
The Home loan EMI calculator helps you determine your installment amount using the criteria specified in each loan scheme within minutes.
Helps Choose The Right Tenure For You
If a certain loan scheme offers a higher loan amount for a smaller tenure, that means you will have to pay more each month towards your EMI, but your overall interest payment would be lower.
Using the EMI calculator, you can determine exactly how much EMI you can pay based on your income and the principal plus interest on your home loan.
Lets You Plan Prepayment
To close your loan out as soon as possible, you can opt for prepayments. You can make the prepayments in small lump sums in between your regular installments, or you can pay off all the pending loans at a time.
You can use the EMI calculator to understand how prepayments will affect your home loan, as well as how much you need for prepayments at different stages of our loan to close it out.
Easy To Use
One of the primary benefits of using the EMI calculator is that it is easy to use. You need to enter the loan amount you want to avail yourself, the associated rate of interest, and loan tenure.
The calculator will do the rest to give you an estimate of how much you will be paying as EMI.
Conclusion
Taking a home loan can be a big decision, so always make sure to research all the schemes and loan options before you apply for any loan. And when you’re comparing schemes, you can use the EMI calculator to understand your eventual EMIs so that you can avail a loan amount and tenure that you can comfortably repay.
