How to Calculate Home Loan EMI with EMI Calculator?

A home loan EMI calculator is an easy-to-use, online calculator that helps you to find out the equal monthly instalments of your home loan. For this calculation part, you need to enter your preferred loan amount, loan tenure and rate of interest. The following article will help you to understand how a home loan online EMI calculator works and what its advantages are.

How to calculate home loan EMI?

With the help of a home loan online EMI calculator, you can easily calculate your possible EMIs. The calculator enables borrowers to adjust their principal amount, interest rate and loan tenure so they can plan accordingly. Thus offering proper insights into the feasibility of your home loan so you can approach the lender, already prepared.

Online calculators work on the following formula to calculate EMIs:

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

Where,

P = Principal or Loan Amount

R = Interest rate per month (to get the monthly interest rate, the annual interest rate is divided by 12)

N = Number of monthly instalments

Here is an example to understand the working of this formula:

If a borrower is looking to apply for a home loan of Rs. 20 lakh for a tenure of 15 years with an interest rate of 7%.

As per the above formula, the EMI will be

EMI = [20,00,000 x 7% x (1+7%)^ 180] / [(1 + 7%)^ 180-1] = Rs. 13,482

This formula does not include processing fees of the home loan charged by the bank.

Advantages of using the home loan online EMI calculator

Following are the benefits of using a home loan online EMI calculator:

Easy process

There are no difficult mathematics or complicated calculations required to calculate the EMI of a home loan. You just need to enter the principal amount, processing fee (if available), interest rate and tenure. After that, with just a click of a button, the home loan calculator will do all the calculations and compute the actual EMIs.

Get the financial charges imposed by the bank

With the home loan, banks also add other financial charges such as total interest to be paid and processing fees associated with the EMI. These charges vary as per the total loan amount, tenure and interest rate, therefore banks only show them in their percentage values. However, with a home loan calculator, you can find the actual values of these charges and do your financial planning accordingly.

Accuracy in calculation

EMI calculations can get complex sometimes, which increases the chances of mistakes if you are doing it manually. But a home loan online EMI calculator eliminates the chances of error and incorrect results and helps you to find the correct EMI every time.

Compare loan offers

By calculating EMIs for your home loan, you can compare the loan offers of various banks available. After comparison, you will get the total cost of each loan and also their respective EMIs. This will help you to pick the most feasible option.

Choose the right loan tenure

Another great advantage of knowing your EMIs for home loans is that you can choose the right loan tenure. If you can manage to pay a higher amount as EMI, then you can choose a shorter period of the loan and pay off the loan debt as early as possible. But, if you cannot afford to pay higher EMIs, then it is advisable to choose a more comfortable EMI, by extending your loan period.

Validate information on your own

While you are negotiating a housing loan with a bank, a home loan EMI calculator helps you to verify the repayment schedule that you are getting. It will help you to calculate all the expenses you are going to come across. But these values could be slightly different from the actual values because banks do not include other charges, such as processing fees, in your EMI calculations.

Check out your amortisation schedule

An amortisation schedule is a sheet that contains a detailed break-up of the entire EMI amount of a home loan, right from the beginning to the end of the loan tenure. It offers a proper insight into how the principal and interest rates of the loan are affecting the EMIs along with the tenure. Through this schedule, you can plan your finances prior and don’t face trouble in the future.

Easy home loan management

If you have some extra funds, you can use them to make prepayments of your home loan and pay off the loan before its actual tenure. For this purpose, you can use a home loan calculator and check how prepayment can help to close your loan sooner.

Now that you have found out how easy and effective it is to use a home loan online EMI calculator, you can plan your loan and manage it more conveniently. It also gives you a proper insight into your loan repayment option, helping to crack and choose a suitable deal.