Home & Kitchen
Using EMI Calculators to Save on Home Loan Interest

Using EMI Calculators to Save on Home Loan Interest

Home loans are a great and affordable way to fund your dream house. However, it does require you to make monthly payments towards loan repayment. In case you are worried about paying off monthly dues for your housing loan, consider using a home loan EMI calculator. EMI or Equated Monthly Installments refers to the amount you need to pay to the lender in exchange for a loan – and a home loan EMI calculator helps you get an accurate estimate of the same. Read on to know what it is and how you can benefit from it.

What Is a Home Loan EMI Calculator?

A home loan EMI calculator is an online tool designed to calculate the payable monthly installments based on three factors – the principal amount, home loan interest rate and loan tenor.

The calculator estimated the EMI using a simple mathematical formula:

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

where P = Principal amount

R = Rate of interest

N = Loan tenor

The above variables play a vital role in determining the housing loan EMI. 

How Does the Principal Amount Affect Home Loan EMI?

Your EMI is directly proportional to the principal amount i.e. the amount you borrow from the lender. This means the greater the principal, the more money you will be paying towards your monthly installments and vice versa. The principal depends on the value or price of the property purchased. Usually, lenders offer up to 75-90% of the property value. The remaining amount is paid as a down payment by the borrower. Typically, lenders offer loans up to INR 30 lakhs, 75 lakhs, and above for up to 90%, 80%, and 75% of the property value, respectively. 

Top 5 Benefits of a Home Loan Eligibility Calculator

Here are the top 5 ways that a home loan eligibility calculator helps borrowers with the EMI payment:

  • Easy & Accurate Calculation

With a house loan EMI calculator, the chances of getting accurate results are higher since there is no room for human errors. The calculations are done based on a formula, so you can rest assured that the estimates are correct.

  • Faster Results

Manual calculations can be time-taking and daunting. However, with a home loan eligibility calculator, it only takes a minute as you compute the required values and wait for the calculator to provide you with the result in an instant. Moreover, you can try out different combinations and change the variables till you get the desired outcome to suit your budget.

  • Aids Financial Planning

The online calculator helps you plan your finances meticulously by providing you with a home loan EMI that is easy on your pocket. Not only do you get to choose the loan amount and repayment tenor you are most comfortable with but also, as it helps you figure out the correct estimate, you know exactly how much you need to keep aside to pay your monthly installments. 

  • Helps Plan Your Prepayment

A home loan EMI calculator can help you decide the right time for home loan EMI prepayment. This means you can choose to pay off the loan amount before the scheduled date. This can help you cut back on the interest rate as well. With the help of the calculator, you can figure out by what time you should prepay the loan and plan accordingly. You can also opt for partial prepayments and bring down the interest rate by some margin. 

  • Guarantees Privacy

A home loan eligibility calculator is easily accessible and reliable and does not require you to share your personal or financial details. Thus, it guarantees the security and absolute privacy of borrowers.

How Does the Home Loan Interest Rate Affect EMI?

When offering a housing loan, lenders charge you an interest rate in exchange for the borrowed sum. Although this rate roughly varies between 8.60% and 14% due to home loans being unsecured loans, the exact rate of interest depends on the borrower’s profile – credit score, salary, age, employment type and status, and so on. Like the principal amount, the interest rate is also directly proportional to home loan EMIs. If the rate of interest increases, your EMI goes up and vice versa. The rate usually remains the lowest for loans up to INR 30 lakhs and gradually increases with a higher loan amount. 

How Does the Loan Tenor Affect Home Loan EMI?

The repayment tenor of a home loan is typically longer as compared to other types of loans. This is because the borrowed amount is usually much higher and often makes it difficult for borrowers to pay it off over a short period. The repayment period can be extended up to 30 years, allowing you to pay the loan EMI comfortably. 

Steps for Using a Home Loan EMI Calculator

Using a home loan eligibility calculator involves three simple steps:

  • Access the online EMI calculator
  • Enter the values of the three variables in the required fields – loan amount, interest rate and tenor
  • Hit the ‘Calculate’ button to fetch the results

Summary

A home loan EMI calculator can be used to compare various offers by different lenders. Aim to settle for one that offers the best deals and cheaper interest rates. Also, keep in mind that a lot depends on your housing loan eligibility, so make sure you meet the basic criteria required to initiate your home loan process.