Buying a home for the family is a happy occasion and today with quick and competitive housing loan interest rates, people are making the best use of this opportunity. However, before availing of a home loan, the borrower must feel sure about whether they can repay the loan amount or not and how the loan EMI would affect their finances.
But, how to calculate loan EMI? A home loan EMI calculator is a tool offered by lenders that borrowers can use to make an accurate calculation of their monthly EMIs before availing of a loan.
The calculator also helps one find out the best housing loan deals in India. The EMI calculator helps borrowers decide whether they can afford a long-term financial commitment like a housing loan or not and plan their finance accordingly.
What is a Home Loan EMI Calculator?
The house loan calculator is an online financial planning tool offered by lenders that helps you calculate the home loan instalments i.e. EMIs (equated monthly instalments) that you need to pay to the bank till the loan amount is completely paid off. It gives reliable and accurate results for better financial planning. To calculate EMIs, you can use the following formula:
e = [p x r x (1+r) n] / [(1+r) n-1]
Here, ‘e’ stands for the EMI amount, p stands for the principal loan amount, r is the interest rate charged by the lender, and n denotes the loan term or tenor.
How Does the Home Loan Calculator Help?
The calculator helps in helps in calculating the home loan EMI and:
• Deciding the loan amount to be borrowed based on your budget
• Planning for home loans to ensure EMI payments are made on time without defaulting
• Planning for prepayment of home loan
Why Use a Home Loan EMI Calculator?
Knowing the loan EMI beforehand using the home loan EMI calculator tool can help you understand the impact of the EMIs on your financial standing. It can prevent you from overburdening yourself with the loan repayment liability if you are not sure about it. The calculator is also very useful because of the following reasons:
- Accurate Calculations – These calculators are reliable and produce accurate results every time in comparison to long and lengthy manual calculations which often produce incorrect results. Thus, they help by providing accurate results in a short time.
- Quick Result – The home loan EMI calculators are really fast and once you enter all of the information (principal loan amount, loan tenor, interest rate), you will receive your monthly EMI amount to be paid and amortization schedule within seconds.
- Customized Calculation – Using the EMI calculator, you can experiment with as many different loan amounts, interest rates, and loan tenor combinations as you want. Trying out different combinations can help you zero in on the right loan amount, tenor, and interest rate suitable for you.
- Comparative Analysis – The online calculator helps you compare different loan interest rate offers from various lenders and select the one that best fits your budget. It helps to understand how each will affect the loan EMI you will need to pay. Thus, this tool helps to compare offers and select the most suitable offer.
- Helps Make Financial Decisions – Using this tool helps you to understand what would be your financial standing after paying the monthly EMIs and other fixed monthly expenses. It helps you to plan and clear off old debts and enhance your eligibility for the loan.
This tool can also help you understand how prepayment or part prepayment can help and what difference will a balance transfer of loan will make to you loan EMIs. - Easy to Use – House loan EMI calculators are simple and easy to use. They are available for free on the lender’s website at all times. Anyone at any time can just go online and do the required calculations without needing any expert guidance.
Summing Up
Home loans mean borrowing a large sum for a long term. Thus, if used wisely, a home loan EMI calculator can assist borrowers in planning their finances well to avoid EMI default and reduce overall liabilities.
The benefit of selecting the lender offering the best interest rates and knowing EMIs beforehand is that it helps borrowers plan their finances in advance.
To get the best home loan interest rate, you must also know what is the statutory liquidity ratio as SLR controls the interest rates prevalent in the economy, which in turn, affects the loan EMI.
The EMI calculator gives borrowers a better understanding of their interest liability and helps them plan for part prepayment and foreclosure and become debt-free as soon as possible.
