Before applying for a Home Loan, it’s important to get down to the basics and search for the best Personal Loan offers in the market. Compare loan schemes based on their loan amounts, interest rates, repayment terms, additional charges, and other parameters and finalise the one that best suits the loan requirement. Furthermore, you should also know how to calculate the loan EMIs to plan your repayment conveniently and on time.
Calculating the home loan EMI amount before accepting the loan offer is crucial, as it helps plan the finances for regular and timely repayments. Here, we will discuss smart ways to calculate the monthly instalments to pay each month.
What are Home Loan EMIs?
EMIs are equated monthly instalments that borrowers pay each month over a predetermined loan tenure. When you borrow a housing loan, you have to repay it to the lending institution in EMIs spread across several months. Apart from the borrowed amount, you also have to pay the interest rate the lender charges in return for their money. Notably, each EMI comprises some portion of the borrowed principal amount and the interest rate. With each EMI repayment, the borrower pays off a small percentage of the loan balance.
Calculating the Home Loan EMIs
You can calculate your Home Loan EMIs based on three crucial variables:
Principal Loan Amount: The higher the principal loan amount, the bigger the EMIs.
Interest Rate: The higher the interest rate, the bigger the EMIs will be.
Loan Tenure: The longer the loan tenure, the smaller the EMIs will be.
Manual Method of Calculating Home Loan EMIs
The mathematical formula to calculate Home Loan EMI is as follows:
EMI = P × r × (1 + r)n/((1 + r)n – 1)
In this formula, P stands for the principal loan amount, r stands for the interest rate, and n stands for the number of months in the loan tenure. The user should find the exact values of these variables and insert them in the formula to calculate the EMIs.
The manual method of calculating EMIs is a tedious, long, and time-consuming process that requires a lot of mathematical skills. Since the user might need to calculate EMIs for different loan terms until they find a suitable loan tenure, the entire process can consume a lot of time and energy when added together. Moreover, since it requires great skill with mathematical calculations, it is highly error-prone to give wrong results.
Home Loan EMI Calculator: A Smarter Way to Calculate EMIs
A home loan EMI calculator is an easier and faster way to calculate loan EMIs. It is an online tool that automatically calculates the EMIs using the variables the user enters. Although the calculator works using the same mathematical formula, it saves the user from having to do the calculations manually. Some benefits of using an online EMI calculator include the following:
- Instant results within a flash second
- No manual calculations required
- Accurate results every time
- User-friendly interface
- 24/7 accessibility
- Easily calculate the EMIs any number of times
- No chance of an error
How to Use a Home Loan EMI Calculator?
Using a housing loan EMI calculator is pretty straightforward. You can calculate your EMIs within seconds by following these easy steps:
- Open an EMI calculator on a reputed lender’s website
- Enter the loan amount, interest rate, and loan tenure.
- The EMI amount to pay each month will automatically appear on the screen.
Besides EMIs, the online tool will display the total interest amount and overall loan cost as you enter the variables. Once you find a loan tenure with easily affordable EMIs, you can plan your payments as per your EMI schedule.
Preparing for housing finance does not start with the loan application. It begins with research, EMI calculations, and repayment planning. Since it is a long-term financial commitment, you should plan timely EMI repayment without delays or default. That is why figuring out the EMI amount is crucial for efficient loan planning. Online EMI calculators are easily available on most NBFCs’ websites, helping users compute their EMIs based on the three critical variables mentioned in this article. They make EMI repayments easier and align with the borrower’s financial requirements.
Now that you realize the importance of calculating EMIs and know how to smartly do that, use a home loan EMI calculator that saves you the trouble of time-consuming manual calculations. Moreover, it permits better financial planning, helps compare interest rates, and enables you to manage the EMIs better.