A home loan EMI calculator is an online tool that is used to check accurate estimation of equated monthly instalments. This calculator considers loan amount, interest, and repayment tenure asked by lenders. This helps to calculate the monthly payments based on the inputs one has entered. This article covers the benefits of using home loan calculators in calculating home loans and how these calculators work to provide you with the calculations.
What is a Home Loan Calculator?
A home loan EMI Calculator is an online tool that helps borrowers calculate monthly payments against a home loan. This includes three components: principal amount, loan tenure and interest rate.
How Does Home Loan Calculator Work?
A home loan calculator works on a mathematical formula for calculating monthly instalments of home loans. These include three inputs to be entered into the loan calculator, namely, principal amount, interest rate and repayment tenure. The formula that these calculators use to provide you with calculations is as follows.
EMI = [P x I x (1+I) ^T]/[(1+I) ^T-1]
Here, P stands for Principal amount, I stands for interest rate and T stands for tenure of repayment offered by the lender.
Then, the monthly interest is calculated by dividing the annual rate of interest by 12 multiplied by 100. This can be better understood by the below-mentioned example.
Suppose, the loan amount is Rs. 1000000, the tenure is 20 years which is 240 months in total and the interest rate is 6%. Now, the EMI can be calculated as below.
EMI = [1000000 x 0.06 (1+0.06)^20]/[(1+0.06)^20-1]
= 192428.12/3.02
= Rs. 63718
Thus, the amount payable every month is Rs. 63718 against a loan of Rs. 1000000.
How to Use EMI Calculators
Just knowing the working of the home loan calculators is not enough. One must also know how to use an EMI calculator so that you can get quick updates of your EMI with just a few inputs.
- There are various EMI calculators offered on the internet by various lenders. Choose an online EMI calculator that offers an easy user interface so that it helps to do the calculations with ease.
- Enter the repayment period offered by the lender which could be a few years or a few months. Once you’re done entering the repayment period, you need to enter the interest rate that is offered by your lender.
Benefits of Using Home Loan Calculators
A home loan calculator is used to calculate home loan EMIs that one has to pay while repaying the loan. This helps you to set a budget and plan your finances accordingly so that you can manage monthly payments.
Easy User Interface
A home loan calculator offers an easy user interface which just requires a few inputs to enter in it. These include principal amount, tenure of repayment and interest rate. After entering these inputs the calculator will provide you with the EMI within seconds.
Compare Lenders
A calculator also helps to compare different lenders, which could be banks or financial institutions. The results will include the total cost of each loan with EMIs. This helps borrowers select the right lender.
Choose Right Tenure
A home loan calculator also helps in choosing the right tenure. This is because, at times, an individual might have to pay a higher EMI within a short period to pay a loan early. In this case, a borrower can pay a more comfortable EMI and extend loan tenure.
Helps in Loan Management
While repaying a loan through EMIs, a borrower might accumulate additional funds that could be used for prepayments. If someone wants to reassess their financial situation and explore how prepayments can be helpful, they can utilise a home loan EMI calculator.
Offers Breakup of Charges
This digital calculator provides borrowers with a comprehensive overview of their financial obligations. It breaks down the total amount due into its components: the principal loan amount and the interest payable. This detailed breakdown helps users clearly understand the full cost of their loan.
Conclusion
A home loan EMI calculator is an online tool used to quickly calculate the EMI of a home loan. However, knowing about the right platforms to find such calculators is important. Popular lenders such as Tata Capital offer this calculator with an easy user interface that can be used even by a beginner. In addition, these calculators are reliable enough and provide results instantly, saving one’s time and effort. This helps you plan your budget accordingly and helps to easily manage these payments.
