While interest rates for home loans have decreased drastically over the past year, borrowers who avail the credits without pre-emptive planning still stand a chance to default on EMI payments. In this regard, it is crucial to know how to calculate home loan EMIs before applying for the credits to ensure their timely repayment. Making use of a housing loan emi calculator can be helpful in this regard.
EMI or Equated Monthly Instalments involve two components – principal and interest amount. There is a formula to calculate the instalment amount, which is given by –
EMI = [P x R x (1+R)^N] / [{(1+R)^N}-1]
In the above formula, ‘P’ stands for the principal amount, ‘R’ stands for interest rate and ‘N’ stands for the duration of the loan in months.
Calculating EMIs manually can, however, be quite cumbersome and even lead to miscalculations. To ease this process, use a housing loan calculator. These online calculators are very much efficient and reduce the burden of computing EMIs manually.
How to calculate EMIs using a housing loan calculator?
Here are a few steps that would guide you through the process of using a home loan EMI calculator and finding out your monthly instalments.
Step 1: Visit the official site of your preferred lender.
And Step 2: Search for the online home loan EMI calculator option.
Step 3: Enter information like loan amount, repayment tenor, and rate of interest. Fill up those fields accordingly.
Step 4: The EMI amount will be calculated instantly.
These are the steps you will need to follow to calculate EMIs using a housing loan calculator. Once you have an idea of the EMI amount, you can arrange funds after that. Although the amount presented is an estimated one because of a variable interest rate, you can still depend on it for further proceedings.
How to reduce your loan EMI?
Since a home loan is a significant financial obligation, the EMIs are generally higher. And paying a large sum every month might feel like a burden to many. Now that you know the process to calculate housing loan EMI, here are a few ways to reduce the amount to help you ease the burden –
- Opt for a longer repayment tenor to reduce the EMIs. Also, note that increasing the tenor will lead to a higher total interest outgo.
- Make a bigger down payment. Making a higher down payment at the very outset will reduce your total loan principal amount. This will allow you to reduce your EMIs.
- Compare the rates offered by different institutions before choosing the one which seems the most feasible to you.
- There also exists a process of home loan refinancing. If you think that you have opted for a loan with a high rate of interest; you can always shift to another institution offering lower rates. This process called a home loan balance transfer and involves minimum transfer charges.
Besides these factors, you should always be updated on the home loan interest rates in India once you think of applying for a home loan. As the interest rate varies, a small variation in it can lead to substantial savings in the long run.
Apart from taking note of the interest rates and EMI, applicants should also take note of additional perks extended by HFCs.
These can include pre-approved offers that are applicable and available on a wide range of financial products like loan against properties, home loans, etc. If you want to check your pre-approved offers, provide a few essential details like your name and contact information.
Apply for a home loan only after considering the above-mentioned factors to enjoy the best terms and optimize your borrowing experience.