EMIs are one of the necessary factors you have to consider before applying for a housing loan. Determining the monthly instalments and planning your finances accordingly is vital. Plus, a comfortable EMI will enable you to repay the loan without defaulting.
A house loan calculator helps you do precisely all of the above. There are various benefits of calculating EMIs before you take a loan.
Steps to Use a Monthly Instalment Calculator-
- Enter your loan amount or principal.
- Enter your loan tenor.
- Provide your applicable rate of interest.
Feeding only the above three information helps you to check not only the loan EMIs but also the total payable interest and the cost of loan (principal + total payable interest).
Working Principles of EMI Calculators
Monthly instalment calculators work on the following formula:
E = P x r x (1+r)^n/((1+r)^n – 1).
In this formula –
- “E” is your EMIs.
- “P” is your loan amount or principal.
- “r” is your loan interest rates.
- “n” is your repayment period or tenor.
Benefits of Using Loan EMI Calculators
- Convenient to use
The primary benefit of using a monthly instalment calculator is that you don’t have to calculate your EMIs manually. The loan EMI calculator from NBFCs like Bajaj Finserv is easy to use, fast, and provides accurate results.
- Helps You Choose the Right Tenor
A loan EMI calculator not only helps you determine monthly instalments but also the right repayment period. Your loan tenor decides how much EMIs you pay and the total amount that you repay.
For example, consider Mr. A has a loan of Rs. 60 Lakh at 11% rate of interest for 20 years. He will pay EMIs of around Rs. 61,000 and the total amount he repays is about Rs. 1.48 Crore.
Mr. B also has the same loan but with a tenor of 16 years. He will pay EMIs of around Rs. 66,000 and the total amount he repays is approx. Rs. 1.27 Crore.
- Shows You the Amortisation Schedule
An amortisation schedule is a detailed list of the EMIs that you pay every month and year. Numerous loan EMI calculators show amortisation schedule as an added feature.
Amortisation is the formula according to which lenders calculate your EMIs. In case of secured loans, the monthly instalment amount remains the same but the interest and principal content in it changes every month.
The amortisation schedule is beneficial when you want to foreclose your loan. Foreclosing can help you save on interest payment. Doing so in the initial years of loan repayment helps you save the most on interest. However, you have to pay a lump sum amount since the majority portion of your loan principal is unpaid. Contrarily, foreclosing towards the end of the tenor does not prove beneficial.
Hence, you can refer to your amortisation schedule to understand the most suitable time to foreclose. Usually, foreclosing your loan between the tenor is the most lucrative as you can save considerably on the interest while not having to pay a lump sum amount.
Using this calculator can also help you from not defaulting on your housing loan EMIs and face the outcomes.
- Limitations of EMI Calculators
Housing loan rates in India are of two types: fixed and floating. Fixed interest rates remain constant throughout your loan tenor while floating rates fluctuate depending on market conditions.
A monthly instalment calculator evaluates EMIs based on a fixed rate of interest. Hence, this calculator may not prove beneficial if you are opting for a loan on a floating rate of interest.Use a home eligibility calculator to be optimally eligible for the loan and enjoy a fast disbursal. The former helps you determine your loan EMIs based on your income, debts, and other factors.