Know How Home Loan EMI is Calculated
Availing a home loan to buy a dream residence mandates borrowers to repay the debt in EMIs over a selected tenor.
This credit form is a long-term commitment that significantly affects a borrower’s outlays and expenditure until repayment. This reason indicates the importance of calculating EMI beforehand to avoid defaults.
In this regard, using a home loan EMI calculator available online can help an individual in planning and managing the subsequent repayments.
How does a monthly home loan EMI get calculated?
EMI stands for Equated Monthly Instalment, which includes repayment of interest and principal component of a home loan.
Lenders use a mathematical formula to determine home loan EMI.
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here P denotes principal amount, and R is the monthly home loan interest rate, N represents the tenor. One needs to enter these parameters in the calculator to compute the EMI amount.
How to use a home loan EMI calculator?
An EMI calculator helps estimate a loan amount that can be availed, alongside the tenor, based on the EMI an individual will need to pay.
Select a free home loan EMI calculator on a chosen lender’s website.
Enter details like loan amount, repayment tenor and the rate of interest.
Once you select these parameters, the EMI calculator will show the total interest payable alongside the amortisation schedule.
Using this home loan EMI calculator, one can know the actual EMI payment for an opted duration. This is a convenient tool that saves a borrower’s time and efforts in understanding the calculation of home loan EMI amount.
A borrower must be aware of the factors and variables that determine the EMI calculation. This will ensure that they generate savings on their disposable income without accumulating unforeseen financial liabilities.
Read More: Know how to use Home Loan EMI Calculator properly