When applying for a home loan, one of the most important things that influence their borrowing decision is the EMI. The EMI should be affordable, and of the best ways to determine the exact EMI, pay-out is to use the EMI calculator. Read on to know more about it.
The one thing that most Indians aspire to buy is – a home of their own. Most people in India rely on a home loan to purchase their dream home. When it comes to home loan, one of the critical things that people consider before borrowing is the EMI or the equated monthly instalment. EMI is the amount that you repay every month to the lender.
Irrespective of the type of home loan you avail, be it home construction loan, top-up loan, or home purchase loan, you must pay the EMI. You can determine the exact EMI that you must pay by using the home loan EMI calculator. Having a clear idea of the amount that you must pay every month will not only help make an informed borrowing decision but also help you sort your finances well.
Here are a few important things you ought to know about home loan EMI calculator:
Formula used for EMI calculation
Most EMI calculator uses the following mathematical formula to calculate the EMI.
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formula, P denotes the principal amount you have borrowed, N signifies the duration of the loan and R represents the interest rate.
While using the calculator you must enter the details of the principal amount, interest rate and the loan duration and the tool will automatically do the calculation and provide you exact EMI amount due. You can change the inputs multiple times as per your need and calculate the amount that is affordable.
Easy to Use
One of the significant benefits of using an EMI calculator is that the tool is free and easy to use. Even if you are a first-time user and have no technical knowledge, you can still use it with ease.
Eliminates human error
Today, almost all the home loan lenders and other financial institutions in India offer free EMI calculator tool on their website. The tool is useful for all loan borrowers as it helps eliminate the human error associated with the manual calculation of the EMI. The tool is smart, and it provides accurate results instantly.
Helps you determine the right loan tenure
Home loan is a long-term financial product. Typically, people apply for a loan for a period of 15 to 20 years or more. This means that you must repay the EMI for the said period. To be able to repay the amount without defaulting for so long, the EMI must be affordable. Using the EMI calculator can help you in this regard.
By using the calculator, you can determine the EMI payout by changing the loan duration. Make sure to assess your current financial condition well and determine the maximum amount you can afford to repay without compromising on your other home expenses and financial goals. Choose a duration so that the EMI is affordable.
Helps you know the exact loan cost
The EMI amount you repay to the lender includes the principal amount, the interest and other charges like the processing fees, etc. But, not many are aware of the breakup cost of the EMI, as the lenders generally present these cost as part of the loan amount. The EMI calculator helps you know the actual value of the loan and the breakup of the charges.
Thus, the EMI calculator is a useful tool for all home loan borrowers. It helps you plan their finances well and makes borrowing easy and affordable.