Home Loan applicants should calculate their home loan EMIs for their desired combination of loan principal and loan tenor even before they begin the home loan application process. They should proceed with the process of applying for a housing loan only if they are financially ready to make such a commitment and can repay the home loan. A home loan EMI calculator can prove to be helpful in this regard. In this article, we focus on this online tool and its working.
What is a Housing Loan EMI Calculator?
A housing loan EMI calculator is an online tool that lets home loan borrowers calculate their home loan EMIs while also helping them calculate the total interest payout on the loan and therefore, the total cost of borrowing money.
The interest on a home loan is calculated on a compounding basis. Home loan EMIs can be calculated using the following formula:
Home loan EMI = [P x r x (1+r)^n]/[(1+r)^n-1]
Here,
‘P’ is the principal loan amount or the original home loan amount borrowed, ‘r’ refers to the monthly rate of interest and ‘n’ refers to the loan tenor in months.
Calculating Home Loan EMIs manually may cause errors. Further, calculating EMIs with this formula can be tricky and time-consuming. Therefore, home loan applicants can use the home loan EMI calculator to try out different combinations of loan value and loan tenor and arrive at a combination that delivers the most affordable loan EMIs. Loan applicants can also use this calculator to plan their monthly budget and cut down on unneeded expenses so that they can comfortably afford to pay their loan EMIs each month. Further, the amortization schedule provided by the home loan EMI calculator, which is essentially a tabular representation of all the EMIs you will pay towards your housing loan and how these EMIs will
How Does the Housing Loan EMI Calculator Work?
The process of using a housing loan calculator is fairly easy. Here are the steps to be followed:
- To start with, you will need to access a housing loan EMI calculator. It is recommended that you use the calculator hosted by your preferred lender or the lender you plan to apply for a home loan with on their website.
- During the next step, enter the loan amount you wish to borrow. Please calculate your home loan eligibility beforehand to know the loan amount you qualify for and will get approved for. To avail of a home loan on the most beneficial loan terms, always apply for a home loan amount you qualify for.
- Now, enter the loan tenor that works best for you. Please keep in mind that while a shorter tenor will help you reduce the cost of borrowing money and increase ROI, it can also make home loan repayment burdensome. While selecting your loan tenor, always give weightage to feasibility and ease of repayment over reduced interest payout.
- Lastly, enter the rate of interest being offered to you. To avail yourself of the lowest home loan interest rate, maintain a good CIBIL score, a low debt-to-income ratio, high job and income stability and a strong credit profile altogether.
Once these three details go into the calculator, the online tool will display your EMIs for your chosen combination of loan value and tenor, the total interest that you will have to pay your lender and the total cost of borrowing the loan. You will also find an amortization schedule, which will prove especially handy when trying to plan prepayments and a home loan balance transfer.
The housing loan EMI calculator is an important tool that you should make a part of your home loan prepayment planning. This tool is free to use and can make the process of home loan approval and repayment quite easy.
