EMIs help repay high-value loans, making finance affordable and beneficial for all. EMIs or Equated Monthly Instalments, as the name suggests, is a part of the equally divided monthly payables to clear the total outstanding borrowing costs within a specified period.
Since lenders check an applicant’s CIBIL score before sanctioning a home loan, one must try making timely payments. In this regard, applicants can use a home loan EMI calculator available online to compute their monthly obligations and settle for one per financial capability.
What is house loan EMI?
A home loan EMI is the monthly payable amount one needs to pay throughout the repayment tenor. This EMI amount comprises the interest rate charged, principal loan amount and the loan tenor.
The formula for calculating home loan EMIs is:
[P X I X (1 + I)N] / [(1 + I)N – 1]
Where P is the principal loan amount
I is interest rate specified by the lender
N is the number of instalments
Manual calculation of home loan EMIs can be time-consuming, increasing the chances of errors. Therefore, to calculate home loan EMIs effortlessly and accurately, one can use an online home loan EMI calculator.
How to use an online home loan calculator?
One can use an online home loan calculator via the following steps:
Step 1: Visit the chosen lender’s official website.
Step 2: Search for a home loan EMI calculator.
Step 3: Enter the total loan amount, tenor and applicable interest rate in their respective fields.
Step 4: Click the “Submit” button.
The calculator will display the total payable amount, total interest payable and EMI payable.
For instance, an individual opts for a home loan of Rs.50 lakh for a tenor of 20 years at 6.7% interest. The total interest payable, total principal payable, and the EMI payable will be Rs.40,88,675, Rs.90,88,675 and Rs.37,870, respectively.
However, the individual can adjust the tenor and opt for the same amount of loan for 15 years. The total interest payable, total principal payable, and the EMI payable will be Rs.29,39,254, Rs.79,39,254, Rs.44,107 respectively. By choosing a shorter tenor, he can pay off his debt faster and save considerably on the total borrowing cost.
Benefits of using a home loan EMI calculator
The benefits associated with using a home loan EMI calculator are:
- It provides accurate results within a second.
- The tool is user-friendly and can be used multiple times with no charges applicable.
- This can help to compare various lenders based on the interest rate applicable.
3 factors affecting home loan EMIs
- Principal amount
The amount one opt for a home loan will determine his/her EMIs. If the person opts for a higher loan amount, it will result in higher home loan monthly payables. Hence, individuals need to assess their requirements carefully before applying for one.
Individuals must know how to reduce the home loan tenor to reduce their total borrowing costs. Individuals opting for a longer tenor will pay lower EMIs, while a shorter tenor will increase the EMIs. However, one must note that opting for a longer tenor will significantly increase the overall payable amount. Hence, choosing an ideal tenor is necessary.
- Interest rate
Individuals are liable to pay interest rates as specified by lenders. However, individuals can learn how to choose between floating and fixed interest rates. Switching from fixed to floating interest rates may help an individual continue his/her home loan at a reduced interest rate.
Leading financiers extend pre-approved offers to existing borrowers. Such offers streamline and accelerate loan applications and are available on several financial products, such as home loans, loans against property, etc. Individuals can check their pre-approved offers by furnishing their names and contact details.
Using a home loan EMI calculator will help potential applicants compute their EMIs, reducing the chances of defaults.