If you are planning to get a housing loan for your dream home, one thing you need to be mindful of is the loan EMI (Equated Monthly Installments). Home loan EMIs are a convenient and easier way of paying the full amount in small installments over the repayment tenor. However, one should make sure their EMIs are always within their affordable range. A home loan EMI calculator helps in this regard – it helps borrowers figure out the EMIs they can afford to pay each month and take a loan accordingly. Read on to know more about the benefits of using a home loan EMI calculator.
What Is a Home Loan EMI Calculator?
A home loan calculator is an online tool that lets you calculate your monthly payable installments. It is available free of cost and can be accessed multiple times. With this calculator, you get to try out various permutations and combinations of loan value, tenor and rate of interest till you reach an EMI number that works best for you.
Calculating Home Loan Interest Rate: Manually V/s Home Loan Calculator
Calculating home loan interest rate manually can be daunting as the process takes a lot of time and there are high possibilities of errors. In the following example, we take a look at both the aspects of calculating home loan EMIs manually and using a home loan calculator.
Instance 1: Using an Online Calculator
The online tool takes three things into account when calculating home loan EMIs. Referring to the above example, you will only need to access the house loan EMI calculator and enter the values in the respective fields – Principal, Rate of Interest, and Loan Tenor.
Once you enter the values, your monthly dues will show up. Apart from the EMI amount, the calculator will also give you an insight into the total interest payable. Thus, you know exactly how much to spend each month towards the loan repayment.
Instance 2: Manual Calculation
Let’s say you opted for a housing loan worth INR 50 Lakhs at an interest rate of 10% for 12 years. Therefore,
Principal (P) = INR 50,00,000
Rate of Interest (R) = 10%
Loan Tenor/Number of Years (N) = 12 years or 144 months
To manually calculate the EMI, you will need to use the following formula –
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
The approximate EMI will then amount to –
EMI = INR [50,00000 x 12 x (1 + 12)^144]/ [(1 + 12) ^ 144 – 1]
= INR 59,754
Using this formula to calculate your monthly EMIs is difficult. There are many different factors involved, which make calculations difficult. Now, let us look at how an online EMI calculator can make the same calculations easier for you.
Top Benefits of a Home Loan Calculator
Here is a look at the top benefits of using a home loan interest rate calculator.
- The home loan calculator helps you devise a financial plan by allowing you to calculate your monthly installments.
- Contrary to manual calculations, such a tool eases the process by saving you time and effort. All you need to do is key in the required details, such as the principal amount, interest rate and the chosen tenor in the relevant fields. The online calculator will instantly display the EMI amount to be paid.
- The home loan EMI calculator is extremely user-friendly and accurate. It rules out any possibility of human errors since the results are automated based on the information provided.
- The tool also provides a breakup of the home loan amount showing how much you will need to pay towards the interest and the principal.
- The online calculator can be used to compare results shown by different lenders so you can choose the EMI option that best suits your budget and requirements.
- With a home loan calculator, you have the flexibility to try out ‘n’ numbers of combinations until you reach a reasonable amount that you are comfortable paying every month.
- The tool is designed keeping privacy issues in mind. Therefore, you need not worry about security issues or disclosure of identity and bank statements while using the calculator.
- On the basis of the results provided by the home loan calculator, you can choose to opt for a longer or shorter repayment tenor. For instance, if you want to repay the loan amount faster and are comfortable adjusting your monthly budget, then you can pick a shorter tenor. However, if you do not wish to cut down your daily expenses, you can settle for a longer tenor.
- The home loan interest rate calculator also enables you to make part prepayments provided you have the funds needed for that. Using the online tool, you can find out how prepayments will alter the loan tenor, payable EMIs and interest. You can then manage the loan repayment better.
Summary
Having a house of your own is a dream for all, particularly once you find yourself financially independent and stable. However, instead of dipping into your savings, opting for a home loan is a far better and more convenient option. If you have a sound plan and a budget to see your through, you may be able to manage your home loan EMIs effectively. Using a home loan calculator can further speed up and ease the process by giving you an accurate estimate of the monthly payable amount so you can comfortably repay the loan amount at your convenience.
