A home loan calculator is an online tool that allows you to compute the monthly home loan EMI amount. To determine the amount you must repay the lender, you must enter the necessary details in the tool, like the interest rate offered by the lender, the amount you want to borrow, and the loan term. After you enter the details, click on the calculate button and the tool will give you accurate results of the amount you must repay.
Today, most of the reputed lenders in India have the loan EMI calculator tool on their website to help their customers compute the EMI and make an informed borrowing decision.
Working of the home loan EMI calculator
The working of the home loan EMI calculator is simple, typically most of the calculators use a simple formula to compute the EMI. The formula is as follows:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above formula,
P is the principal amount or the amount you wish to borrow
R is the interest rate levied by the lender
N is the loan tenure or the number of monthly instalments you must pay
All the components are variables. This means you can easily change the value of these inputs and try different permutations and combinations to know how the change in the tenure and the loan amount affects the EMI amount.
Benefits of using home loan calculator
Many financial advisors recommend using the home loan EMI calculator to all home loan applicants, especially the first-time borrowers.
One of the most significant benefits of using a home loan EMI calculator is that it allows you to compute the EMI without any hassles. You just enter the necessary details in the relevant fields and the tool will showcase the results within a few seconds.
The EMI calculator helps you get accurate results. This means based on the calculations you can plan your finances well and choose the right loan amount and tenure so that the EMI is affordable. Also, the tool helps you avoid the risk of mistakes associated with manual calculations.
Apart from helping you know the exact EMI, the EMI calculator also gives you a break-up of the various charges associated with the home loan, such as processing fees, the interest payable till the end of loan term, etc. This will help you know the actual loan cost.
Just like the credit score, the loan tenure you choose has a direct impact on the EMI amount and affordability. Generally, the EMI is lower for long-term loans and vice-versa. So, you can adjust the loan tenure on the calculator to know the EMI amount and choose the right tenure so that you can easily pay the EMIs without compromising on your other goals.
Another significant advantage of using the home loan EMI calculator is that it allows you to choose the right lender. You can compare the different offers from different lenders and see how the interest rate levied by the lender affects your EMI. Thus, you can choose the right lender that offers the loan at the most affordable rate.
Final Word
Thus, a home loan EMI calculator is a useful tool that helps you make the right borrowing decision. So use it to your advantage and enjoy a hassle-free borrowing experience.
