Why & How To Use A Home Loan EMI Calculator In 2022?

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Buying a good home loan is as crucial as buying a good house. One needs to dig through every option, especially as a new buyer. In the case of a home loan, there are two factors to check ahead of the purchase, the Rate of Interest (ROI) and the Equated Monthly Installment (EMI).

Since a home loan is a long-term financial commitment, check for affordability before choosing a loan. It is easier now; one can use a home loan EMI calculator, a financial tool that assesses monthly repayment with each loan. Based on the result, one can weigh all the options before siding with any. Through this article, we will find out the purpose and benefits of the EMI calculator.

The Purpose of a Home Loan EMI Calculator 

Home loans are repaid through EMIs, which include both a principal and an interest amount. It is a crucial factor to evaluate when choosing a house loan. It helps to schedule the finances and decrease the chance of a payment default. Therefore, calculating EMIs ahead of purchasing helps in planning the loan better.

One can calculate the EMI, using the formula, EMI = P × r × (1 + r)n/((1 + r)n – 1). Where P stands for the loan amount, r for interest rate, and n for monthly loan tenure. However, because the accurate formula is known, it does not ensure accuracy in results because the EMI calculation is tricky. Moreover, manual calculations are prone to mistakes. Furthermore, manually forming an amortization schedule is tedious.

That is when an online home loan EMI calculator comes into play. It is an online tool available for free on most lenders’ websites. It assesses the monthly EMIs for a specific loan amount. By evaluating the loan amount, the interest rate, and the loan tenure. It is generally better to calculate the EMI at a higher interest rate to create a buffer for any future interest rate.

One can use the calculator to test different loan amounts and tenure to find a reasonable amount payable monthly. Using the calculator, one can create a repayment schedule and plan their loan journey.

The Benefits of a Home Loan EMI Calculator before Buying a Home Loan

With the high real estate prices, self-funding a new house’s total cost is not practical. Instead, one can generate the funds using a house loan. Many financial institutions propose reasonable interest rates for making home loans affordable.

However, it’s necessary to examine the proposals ahead of purchase. The best way to assess is by using an online EMI Calculator. Let’s see how this financial tool comes in handy for new buyers.

Estimates EMI – EMI calculator breaks up the loan amount, showing how much one has to pay towards the principal and the interest.

Eases Calculation – The calculator with just a few inputs like principal loan amount, rate of interest, and loan tenure displays the home loan EMI amount.

Ensures Accuracy – In manual computations, there are possibilities of errors. In contrast, the EMI calculators give an accurate and error-free result.

Ensures User’s Security – While using the online home loan EMI calculator, one does not have to disclose the identity; hence it ensures security.

Evaluates Different Offers – The EMI calculator evaluates offers from different banks. Show the total loan amount and the respective EMIs to choose the best option.

Provides Users Flexibility – Through the calculator, one can develop numerous permutations and combinations that help arrive at the correct EMI figure.

Plans Ahead Of Purchasing – The result of the home loan EMI calculator gives an idea of the monthly installments and enables one to devise a financial plan.

Plans The Prepayments – One may have extra funds for prepayments. In that case, one can use the tool to assess how prepaying will change the loan tenure, interest, and EMIs.

Prescribes A Loan Period – The EMI calculator helps decide whether to take a home loan with a shorter or longer duration. If one can pay a loan faster, one can take a home loan with a shorter tenure. Otherwise, you can go in for a home loan with a longer duration.

Conclusion

Never bite off more than you can chew. The saying goes with both buying a home or a home loan. Therefore, check the affordability in both cases and ensure a reasonable home loan. It’s best to take the help of the online EMI calculator.

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