Applying for a home loan is probably one of the biggest financial decisions you will make. Since it involves borrowing a huge amount, you plan your finances well so that you can repay the same without any hassles. Typically, the home loan repayment lasts for about 20-30 years. This means you must repay the amount through EMIs (Equated Monthly Instalments) for the said period.
The EMI amount must be affordable enough so that you can repay the same without compromising on your other financial goals and regular expenses. But planning the finances for a home loan is not as easy as it may seem. But there are certain tools like the EMI calculator for home loan, which can be helpful to plan your finances.
What is a home loan EMI calculator?
A home loan EMI calculator, as the name suggests, is an online tool that allows you to compute the exact EMI amount payable for the amount you borrow. In other words, you can precisely the amount you must repay the lender in advance before you get your loan approval.
The EMI calculator is an easy-to-use tool. All you must do is enter certain details and the calculator will do the calculations and showcase the result within seconds. Some of the vital details you must enter in the tool to know the EMI amount, include –
·The loan you want to borrow (i.e., the principal loan amount)
·The repayment period for the loan (i.e., the term for which you want to avail the loan). You must enter the duration in months
·The interest rate (i.e., the interest levied by the lender)
One of the significant features of the home loan EMI calculator is that you can enter the details multiple times and use different combinations of interest rate, tenure, and loan amount to know the EMI that you can afford to repay.
What is the formula for home loan EMI calculation?
Most home loan calculators available on the lender’s website use the following formula for EMI calculation.
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formula,
·P represents the principal amount or amount you want to borrow
·R represents the interest rate levied by the lender
·N represents the repayment tenure
Now that you are aware of what the EMI calculator is and the formula used for calculation, it would help to know its benefits.
·Makes calculation easy
Calculating the home loan EMI manually can be daunting, especially if you are not good in dealing with numbers. Besides, when you do the calculations by yourself, there is always a great risk that you may commit mistakes. And since EMI is such a critical aspect of financial planning, a small mistake can throw off your budget and financial planning.
To avoid such silly mistakes, it is better to use the online EMI home loan calculator. It not only gives your instant results, but you can be sure that the amount is accurate.
·Helps you choose the right lender
The home loan interest rate varies from lender to lender. And the interest rate has a direct impact on the EMI amount and affordability. So, by using the emi calculator you can compare the different offers from lenders and check how their interest rate affects the EMI and choose the right lender with an affordable interest rate.
Apart from the above benefits, the EMI calculator allows you to get the exact break-up of the EMI so that you understand the various charges and determine the exact loan cost.
Now that you know how to use the EMI calculator, use this important tool to plan your finances for home loan and manage the repayment efficiently.