A home loan is an important long-term financial commitment. So, one should thoroughly conduct financial planning before opting for this. A home loan calculator is one of the best tools to help one plan their home loan repayment journey successfully.
Here is a detailed overview of what a home loan calculator is and how it works.
What is a home loan calculator?
A home loan calculator is a free online tool for computing home loan EMIs. It helps the customers in making informed decisions and how they will be able to repay the loan. This online calculator allows an individual to plan their home loan repayment and ensure that the EMIs are paid on time. It also assists the borrowers in making a decision regarding prepayment of the home loan.
With the help of this calculator, monthly EMIs of home loans are calculated depending on the home loan’s interest, principal and tenor.
Functions of a home loan calculator
There are various benefits of calculating home loan EMI beforehand. With the help of an EMI calculator, an individual can quickly and easily calculate their EMIs. Calculating home loan EMIs involves complicated calculations, so it would be difficult and time-consuming if done manually. A home loan calculator will help in:
- Providing a detailed breakdown of the loan repayment
- A clear idea of the loan amount one can borrowÂ
- Checking the overall loan affordability.
One can also use this tool as a home loan interest rate calculator. Using this tool, one can calculate and compare the different interest rates imposed by different lenders.
Advantages of using home loan calculator India
Here are some other advantages of using a home loan EMI calculator:
- It is a simple, quick and easy tool for calculating home loan EMI. It is also entirely online and can be accessed any time anywhere.
- The tool is dynamic, i.e., figures entered in it can easily be changed and adjusted.
- It helps in budgeting your expenses depending on your income
- It is absolutely free and hassle-free to use
- Helps in determining whether to increase or reduce your home loan’s tenor
- Assist in determining the total interest that the borrower needs to pay at the end of the loan tenor
- Provides accurate results, as there is no room for manual errors
- Saves a lot of time and effort that one has to invest while performing manual calculations.
- Helps in ascertaining whether an individual is in a proper financial condition to repay the borrowed loan or not.
How to calculate home loan EMI?
Here is the mathematical formula that is used for home loan EMI calculator.
EMI Amount = [P X R X (1+R) ^N}/ [(1+R) ^N-1],
where P, R and N are all variables. So, the EMI value also changes when any of the three variables get changed.
Here P stands for “Principal Amount”. It is the original loan amount offered by the lending institutions to the borrowers on which the interest will be calculated.
R denotes the “Rate of interest” on which the lending institution agrees to sanction the loan.
N stands for the “number of years” for which the loan has been taken. Â
Note:Â The loan tenor is usually calculated monthly, as EMIs are paid monthly.
The home loan EMI calculator helps in efficiently calculating the interest payable and EMI correctly. One only needs to enter three dataÂ
- Loan amount
- Loan tenor
- Interest rate
How can one reduce the monthly EMI amount?
Before applying for home loan and calculating EMIs, individuals can also check their pre-approved offers provided by various financial lenders. These offers streamline one’s loan application process, and to check these, one requires to provide one’s name and contact details. One can only make their EMI amount affordable if one can calculate it beforehand. Here are some ways following which one can reduce their EMI payables:
- Increasing the loan tenor: It is one of the best ways to which one can reduce the EMI amount. Using a home loan calculator, the individual can determine how much EMI one needs to pay in a certain loan tenor. Accordingly, they can increase the tenor and pay lower EMIs.
- Paying a higher down payment: If an individual agrees to pay a bigger down payment, it will simultaneously reduce the overall loan amount and reduce the EMI amount.
So, one can use a home loan interest rate calculator before applying for a home loan to make a suitable decision.
