Availing a home loan aids immensely in high-value property expenditures such as a home purchase, house construction or home repairs/expansion. It is an important financial decision wherein calculating the payable EMIs is a critical part of the loan planning exercise. The monthly instalment pay-out determines how comfortably one can repay their housing loan without overreaching the budget ceiling.
What is an EMI?
Your monthly EMI comprises the principal sum and the interest charged on the house loan. During the initial years of the loan tenor, you tend to pay more towards the interest component. Gradually, as you repay the loan, a higher portion of the EMI is adjusted towards the principal amount. This is due to the fact that EMIs are computed on a reducing balance method, which eventually works in the borrower’s favour. The interest rate and loan tenor are vital deciders of a home loan EMI.
What is a Home Loan EMI Calculator?
A home loan calculator is among the best credit planning tools for an individual seeking housing finance. It helps in the calculation of monthly instalments that one needs to pay until complete loan repayment. Once you secure a home loan, you repay the borrowed amount along with the interest sum, in the form of smaller manageable pay-outs each month, known as Equated Monthly Instalment (EMI).
How to Use a Home Loan Calculator
A housing loan calculator is used to compute the payable EMIs based on the following considerations:
- Home loan amount – This is the money you wish to borrow from the lender. The principal usually extends from several lakhs to a few crores.
- Rate of interest – It is the interest lenders charge for lending funds. The rates offered to borrowers vary depending on loan eligibility and the lender’s own rates, which normally differs for every lending institution.
- Loan repayment tenor – The number of years required to pay off the home loan is your loan repayment tenor.
Home loan applicants can easily access an online home loan calculator on most lender websites. They can either enter the appropriate values or use a slider to set the desired loan amount, applicable interest rate and the preferred tenor. Upon providing these details, the calculator will compute the results accurately within seconds and display it on the screen.
Features and Benefits of a Home Loan EMI Calculator
A house loan calculator is a very handy tool that comes with several useful features and benefits. These include:
User-Friendly Tool
An online EMI calculator for home loans is extremely easy to use for people of all age groups. You need to input just three standard variables – the loan amount, interest rate and repayment tenor. The actual computation is then done by the calculator without any hassle of complicated number crunching.
Break-up of the Loan Cost
Borrowers can see a detailed repayment schedule right from the start of the loan tenor until its completion. The table shows you the break-up of the principal and interest components, along with the number of instalments, due date, outstanding principal and closing principal. Such concise credit information in tabulated format is referred to as a loan amortization schedule. It gives an extensive overview of the entire loan helping you understand the true cost of credit.
Comparative Analysis
One may use a loan calculator to compare the loan schemes extended by different financial institutions. Calculating the EMIs of each loan deal and the total credit cost lets you narrow down on the most feasible option. It enables you to determine how much money might be saved by selecting a particular lender.
Selecting the Right Tenor
Knowing the expected EMIs allows you to choose the right loan tenor. If you seek lower EMI pay-outs, you can stretch the duration of your loan. It will keep your EMIs within reasonable limits. However, a tenor extension increases your EMI outgo over the years. So, if you wish to pay off your loan at the earliest and don’t mind paying higher EMIs, you could opt for a shorter tenor. This will restrict the loan interest component lightening your overall debt burden.
Efficient Loan Management
During the loan tenor, borrowers may save up extra funds in the form of bonuses or matured investments, which can be utilised to pre-pay their home loans – partially or fully. A home loan calculator lets you decide the right time to initiate pre-payments so as to close the loan before the end of the tenor.
Validating Information
When negotiating house loan deals with any lender, you can use the calculator to verify their repayment schedule. Sometimes, the actual numbers could vary from the ones estimated through the online tool because lenders may include other fees and charges in the EMI calculation. Borrowers need to account for these differences while computing the loan cost.
Summing Up
Calculations pertaining to home loans are all about big numbers. When done manually, they can get complex and time-consuming with multiple likelihood of errors. A home loan EMI calculator accords the perfect solution to these problems. Hence, it is advisable to access this financial tool while planning housing credit. It will enable you to compute the necessary finances correctly so that you can assess loan affordability. One can also input different values of home loan combinations to tailor the loan as per preference.