Know Everything about the Housing Loan EMI Calculator
The housing loan EMI calculator is a software-based tool that allows potential borrowers to evaluate their repayment obligations. Individuals can calculate the EMI obligations by entering the loan amount, tenor, and interest rate.
According to a report, the home loan sector has seen a 142% growth in the first quarter of 2021–22. This growth can be attributed to affordable residential properties and lower interest rates.
However, to understand the possible savings and make an application accordingly, one needs to apply the EMI formula. Instead, using a housing loan calculator will make the process simpler.
How to use a housing loan EMI calculator?
Potential borrowers should know that a housing loan calculator comes pre-installed with lender-specific terms. The results will be calculated multiple times based on a user’s input.
The steps to use this digital tool are as follows.
Step 1: Visit a preferred lending institution’s website and select the EMI calculator from the calculator tab
Step 2: Select the loan amount or drag the slider
Step 3: Enter the loan tenor and interest rate
Step 4: The EMI amount and total interest payable will be displayed underneath.
Individuals can use this home loan EMI calculator to find the repayment tenor that suits their financial capacity. This will help them initiate healthy savings on disposable income.
However, to reach this conclusion, a housing loan EMI calculator uses a simple algorithm. This algorithm is based on a mathematical formula.
What is the formula to calculate EMI?
This digital tool uses the following formula-
EMI= [P x R x (1+R) ^n] / [(1+R)^ n-1]
Here, P stands for principal loan amount, R represents housing loan interest rate, and n represents the repayment tenor. Here is a simple example to explain the concept better.
An individual avails a home loan of Rs.10 lakh for 8 years. The interest rate levied on the borrowing is 6%. He/she need to repay EMI of Rs.13,142 approximately. The total interest payable will be Rs.2,61,600 approximately.
An individual can apply this formula to evaluate his/her repayment obligations before making a loan application.
However, manual calculation of EMI can be time-consuming and inaccurate. This can create confusion in the borrowing process. Instead, using a home loan calculator will give precise results within seconds.
Many calculators also offer EMI breakdown that makes it easier to understand the fund requirement. This tool also extends personalised benefits that help streamline the borrowing process.
What are the benefits of using an EMI calculator?
One can find a housing loan EMI calculator on most lending institutions’ websites for free. However, it is recommended to use a calculator of a chosen lender to understand the repayment obligations.
Nevertheless, the benefits of using a home loan EMI calculator are as follows:
· Help find the right tenor
Every borrowing bounds a borrower into a long term repayment obligation. Choosing the wrong tenor can disbalance the financial capability. Ideally, a short tenor reduces the interest outgo but increases the EMIs. While opting for a long tenor will help reduce the EMIs.
Potential borrowers can use this digital tool to know how much home loan EMI they can afford and choose a tenor accordingly.
· Balance transfer facility
Existing housing loan borrowers can use the tool to understand the possible savings before making a housing loan balance transfer application. They can compare different lenders and their EMI and interest terms to make an informed decision for the said requirement.
This will help them reduce their repayment obligations and make healthy savings. However, individuals should opt for refinancing only in the initial years of borrowing.
Opting for refinancing also aids a borrower in finding a reliable lender levying affordable interest rates and terms. Credible borrowers are laible to gain quality service and customised offers extended by lenders.
For instance, many HFCs extend pre-approved offers that make the loan application hassle-free. These offers are applicable on financial products, such as a home loan, loan against property, etc. Check your pre-approved offer by entering your name and contact number.
· Mobile-friendly interface
Due to the growth of mobile users, many lending institutions have made their digital applications compact and mobile friendly. One can access a home loan EMI calculator instantly via their smart device.
Read Also: 5 Helpful Suggestions to Reduce the Burden of Home Loan EMIs
Besides the mentioned benefits, individuals can also use this calculator before making EMI prepayments on a home loan.
These are the essential information on using a housing loan EMI calculator and its benefits. Potential borrowers should also keep a tab over eligibility and documentation against the said credit form to streamline the application.