A home loan is a long-term financial commitment. Hence, borrowers should have a repayment plan ready to ensure timely pay-outs of the EMI amount. The borrowing can prove counterproductive if not planned diligently, leading to a massive financial burden.
Hence, before proceeding with the application, borrowers should have an in-depth idea of how to calculate home loan EMI. Computing EMI beforehand helps borrowers steer clear of financial hindrances that may arise in the future, helping them gauge fixed expenses and manage financial obligations.
How to calculate home loan EMI?
With the easy accessibility of the home loan EMI calculator, it has become easy for borrowers to evaluate home loan EMIs.
Here are the steps that borrowers can follow to compute EMI amounts using the online home loan EMI calculator-
Step 1: Visit the preferred lender’s official website and select home loan EMI calculator.
Step 2: Then enter the loan amount in the first box. Borrowers can also use the slider to adjust the loan amount.
Step 3: Now input the rate of interest and loan tenor in the respective boxes.
On entering the three variables, borrowers can view the EMI amount, total interest and total payable amount.
Borrowers can recalculate the EMI amount anytime by altering the three variables. Trying out several permutations of the variables helps borrowers settle for an affordable EMI amount. The mathematical formula based on which a home loan EMI calculator works is-
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here P is the loan amount
R denotes rate of interest
N represents loan tenor
For instance, if borrowers want to determine EMI on Rs.50 Lakh home loan, charged at an interest of 8%, taken for a loan tenor of 25 years. He or she will have to bear Rs.38,591 as monthly instalments, Rs.65,77,243 as total interest payable and Rs.1,15,77,243 as the total amount payable.
Benefits of using a home loan EMI calculator
Home loan EMI calculator India bestows borrowers with several benefits, helping them sail through the repayment tenor efficiently.
Save time and provide accurate result
The home loan EMI calculator curbs the hassles of manual calculation, thereby saving turnaround time. Moreover, manual calculations are susceptible to errors. Using a home loan EMI calculator, borrowers can get accurate EMI amounts instantly.
Compare loan option
One of the significant benefits of using a home loan EMI calculator is that borrowers can compare various loan options offered by several financial institutions. Borrowers can easily try different combinations of loan amount, interest rate and loan tenor and get to know respective EMIs and the total cost of each loan option, helping them narrow down to the affordable loan option.
Help planning prepayment
Since borrowers can calculate home loan EMI pay-outs beforehand, they can manage their finances well, helping them plan prepayments and foreclose loan accounts before the loan period ends.
Select the right repayment tenor
Knowing the EMI amount beforehand helps borrowers choose the right loan tenor. Borrowers can opt for a longer loan tenor if they want to reduce the EMI burden. On the other hand, borrowers, who can afford higher monthly instalments, can choose a shorter loan tenor. In this context, borrowers should know how to trim home loan tenor.
Calculating home loan EMI amount helps borrowers make an informed decision. Hence, before making an online home loan application, borrowers must evaluate the EMI amount beforehand.
Apart from evaluating the monthly instalments, borrowers should also know about the home loan fees and charges. These hidden costs significantly contribute to the cost of borrowing. Hence, borrowers should include these charges while computing home loan EMI.
Furthermore, borrowers should also check the pre-approved offers extended by leading financial institutions on financial products like housing loan, loans against property etc. These offers accelerate the application procedure and reduce the hassles of documentation. Intending borrowers can check their pre-approved offers by submitting their names and contact details.
To sum up, monthly instalments are integral to any borrowing; hence borrowers must know how to calculate home loan EMI. It will help them plan the repayment schedule and avoid defaulting on EMI pay-outs.