A home loan is one of the most sought after loan options at present if anyone is planning to purchase a property. However, it requires a lot of planning and research to settle for the correct loan option. In this regard, using a home loan calculator proves effective as it helps borrowers compute EMIs beforehand.
It is an effective online tool that helps prospective borrowers to estimate the loan amount one is eligible for and then plan their expenses and decide on the repayment tenor accordingly. Getting an estimation of EMI payouts will minimise their chances of defaulting on payments.
How does a home loan EMI calculator works?
The affordability of a loan depends on the EMIs that one will have to repay throughout the tenor. Therefore, individuals can calculate their monthly instalments beforehand via a home loan calculator by following the steps mentioned below:
Step 1: Firstly, visit the official website of one’s preferred lending institution and head to the home loan EMI calculator section
Step 2: Adjust the slider for choosing the desired loan amount
Step 3: Choose a loan tenor and interest rate using this slider
After entering these three components, an online calculator will provide the EMI amount needed to pay against a loan amount within seconds. Moreover, individuals can recalculate the EMI amount instantaneously by altering their inputs.
Furthermore, borrowers can always opt for a manual calculation to find out their EMI burden by using the mathematical formula: EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. Here, P is principal amount, R represents interest rate, and N denotes loan tenor.
Benefits of using a home loan calculator
There are multiple benefits of using an online EMI calculator; here are some highlights –
- Fast and error-free calculation: Manual calculation can prove tedious and is susceptible to mistakes. With a home loan EMI calculator, one can get an idea of the exact EMI amount in no time, and that too without any mistakes.
- Helps in financial planning: Home loan calculator clears the future financial liabilities as one gets to compute the EMIs in advance.
Furthermore, knowing EMIs beforehand helps one to plan prepayment, which will further reduce interest rates and help one to pay off his/her debts without any hiccups.
- Choosing a suitable home loan tenor: Once an individual computes the monthly instalments, it becomes easy to choose an appropriate loan tenor as per his/her repayment capability. A point to understand here is that a shorter tenor will result in higher EMIs, but the total repayment burden will be low, and vice versa.
- Compare loan options: Even a slight change in the interest rates impacts EMI payouts. Borrowers can put the varying interest rate from different lenders by adjusting the slider to evaluate EMIs, which helps them narrow down on the best home loan option.
Furthermore, individuals can use a home loan calculator for free as many times as they like and get comprehensive outputs. Besides measuring home loan affordability, one must understand the factors that will help to improve on this factor and get a better loan deal.
Factors that determine home loan affordability
Here are the factors which will help borrowers get a high-value loan amount at affordable interest rates:
- CIBIL score: One of the significant factors that determine the affordability of a home loan is to maintain a good CIBIL score. An individual with a credit score of 750 and above will be offered a low-interest rate by lenders as they are considered trustworthy borrowers.
- Income and employment status: Another point to take note of in this respect is an applicant’s income and employment status. Borrowers with a steady monthly income can negotiate a competitive loan deal.
Moreover, the current home loan interest rate is affordable as per RBI’s monetary policy, which makes borrowing even more cost-effective.
Apart from looking at the affordability, one must also meet the home loan eligibility criteria to increase his/her chances of loan approval.
Furthermore, borrowers can look into the pre-approved offers extended by leading lending institutions. These offers expedite the lending process and reduce the cost of borrowing. Borrowers can check their pre-approved offers by entering their name and contact details.
To sum up, a home loan is a significant financial obligation; hence calculating the monthly instalments using a home loan calculator will prove beneficial for borrowers as it will help them decide on a suitable repayment tenor and manage their finances accordingly.