How to use a home loan EMI calculator? By CIOReviewindia Team

How to use a home loan EMI calculator?

CIOReviewindia Team | Friday, 15 November 2019, 06:27 IST

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How to use a home loan EMI calculator?

A home loan is a huge financial responsibility so you need to consider several factors before taking one on. You should consider the fact that a home loan is a high-value loan which comes with high tenures lasting for 20 years or more. The principal loan amount you need and the interest rate charged by the lender should also be taken into consideration. After all, these are the elements that ultimately determine the equated monthly instalment or EMI you have to pay. Even before you approach a lender, you can use a home loan EMI calculator to understand just how much your monthly instalment amount could be. Here’s how you can use one.

Home loan EMI calculator – definition and description

A home loan EMI calculator is a freely available online tool, which, as the name suggests, helps you compute the possible EMI against your home loan. This tool is available on the internet and on the website of all home loan providers. It contains tabs relevant to your home loan, such as the loan amount, interest and tenure, which the user must enter and instantly calculates the EMI. What’s more, this tool can be used as many times as you like, until you arrive at an EMI amount you find affordable.

EMI calculation formula

The EMI calculator for home loan computes the payable EMI with the help of the below mentioned formula

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

In which:
EMI = Equated monthly instalment
P = Principal loan amount
R = Rate of interest
N = Number of months i.e. repayment tenure

How to use the calculator

Here are the steps you need to follow, while using a housing loan calculator.

Step 1 – Visit the website of the lender. Go to the home loans section and select the home loan EMI calculator tab. The EMI calculator pops up. It consists of a few tabs in which you need to enter some numbers.

Step 2 – Begin by entering the principal amount you intend to borrow. Consider the down payment you can afford before you enter this figure. Also, while inputting the principal loan amount, you must factor in, not only the value of the property you intend to buy, but also additional charges such as loan processing fees, stamp duty fees etc. Since these amounts are also high you can include them in the principal loan amount.

Step 3 – You should enter the interest rate you can afford in the interest rate tab of EMI calculator for housing loan. However, you need to check the lender’s minimum lending rate and then input the numbers. Remember that a 0.5% difference can also increase or decrease the EMI amount significantly.

Step 4 – Now enter the loan tenure in the adjacent tab. You need to consider how long you would take to repay the loan. Typically, there would be a drop-down menu from which you can select the tenure. Home loans are available for tenures of 20 years; however you need to select the tenure in months.

Step 5 – Once all tabs are filed, you can hit enter. The home loan calculator will compute the payable EMI amount in seconds.

Before you take out a home loan, it is recommended that you use this calculator. The benefit of using the calculator before applying for a home loan is that it gives 100% accurate results thus helping you understand the exact EMI amount payable. Also, you can use various permutations and combinations of interest rates, tenures and even principal loan amounts to arrive at a reasonable EMI amount.

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