When you avail of a home loan, you must repay the same in smaller instalments known as the EMIs (equated monthly instalments) throughout the tenure or until you repay the amount in full. The EMI consists of two components. One, the principal amount and two, the interest component.
The EMI you repay may vary based on several factors such as the loan amount you borrow, the repayment tenure you choose and the interest rate levied by the lender. As a borrower, you must ensure that you compute the EMIs beforehand so that you can plan your finances accordingly and repay the amount without any hassles.
But, how do you calculate the EMIs? You can do it manually or you can use the housing loan EMI calculator. It is an online tool and an effective alternative to determine the EMI payable for the loan you wish to borrow. Today, all reputed lenders in India have this tool on their website and encourage their potential customers to use it so that they can make an informed borrowing decision.
What is a home loan EMI calculator?
As the name suggests, the home loan EMI calculator is an online tool that allows you to calculate your monthly loan instalment. You must enter the details in the relevant fields and the tool will automatically do the calculations and give you accurate results.
The formula for home loan EMI calculation
Most of the home loan EMI calculators uses the following formula to compute the EMI amount
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formula,
- P is the principal amount, i.e., the amount you wish to borrow
- R is the interest rate levied by the lender
- N is the loan tenure or your EMI repayment period
All the above components are variables, meaning you can change the value of these components multiple times and recalculate the EMI. Even a slight difference in the value of any one of the components will affect the EMI.
Let us understand the working of the home loan EMI calculator with an example.
Mrs. Batra borrowed a home loan of Rs. 35 lakhs from a reputed lender for 30 years or 360 months. The lender levied an interest at 8.65% per annum.
P = 35 lakhs, R = 8.65%, N = 360 months
When you put these details in the EMI formula, the monthly instalment would be around Rs. 27, 200
Benefits of using home loan EMI calculator
- When you apply for an online home loan, it is advisable to use the home loan EMI calculator as you can get the following benefits.
- Using the EMI calculator is easy. You must enter the details in the relevant fields and press the calculate button to get the results.
- The EMI calculator allows you to know the break-up of the various charges such as processing fees, interest payable, etc. This will help you understand the actual loan cost.
- Using the EMI calculator allows you to choose the right loan tenure. If you can afford to pay a higher EMI, you can choose a shorter loan term or you can extend the term so that the EMI is affordable.
- You can use the home loan calculator to compare the loan offers from different lenders. The results will show you the total loan cost along with the EMIs payable. This will help you narrow down your choice and choose the right lender.
Final Word
Calculating the home loan with EMI calculator is easy. You need not have any technical skills to use the tool. Ensure that you use the calculator to know the EMI beforehand so that you can plan your finances well.
