Business

The Utilization Of Emi Calculators

What is Home Loan EMI?

Home Loan is the loan taken from any financial Institution for purchasing a home. Having a home is a desire, hence, the home loan is one of the greatest and most sought out loans in the present scenario. Since the value of the residential properties goes on increasing, so owning a home is a terrific idea both from an owner’s view as well as from an investor’s view. To fulfill the same in an effortless way you have the option of home loans available with innumerable banks.

Home loan, typically taken is a big amount, for an extensive period, upon which a specific percentage of interest is imposed. So, a well-planned EMI calculator is a valuable tool that will erase all your doubts within seconds.

It comprises of a box, with 3 sliders, Loan Amount, Loan Tenure, and Interest Rate. It is as straightforward as that, once you fill in the specifics you will be shown how much EMI (Equal Monthly Installment) needs to be handed over to the bank every month, to pay off the loan to the Bank.

The formula for calculating EMI

You can calculate your EMI Amount with the assistance of the mathematical formula:

EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1], in which, P, R, and N is the variable, which signifies that the EMI value will change every time you change any of the 3 variables.

Let’s talk over these 3 variables in detail.

P refers to ‘Principal loan Amount’. The principal amount is the original loan amount provided to you by the bank, on which the interest will be estimated.

R refers to the rate of interest set by the bank.

N stands for the number of years for which the loan has been taken. Since EMIs are paid every month, the period is calculated in the number of months.

So, if you take a home loan of Rs. 50 lakhs with an average interest rate of 12%, the estimated EMI will be:

P = 50 lakhs, R = 12%, N = 10 years or 120 months

EMI = [5000000 x 12/100 x (1+12) ^120] / [(1+12/100)^120-1]

EMI = Rs. 71735

How does an EMI Calculator work?

An EMI Calculator is a neat tool that calculates the monthly amount payable to the lender that is the Bank every month. To determine the EMI applicable to your loan amount, you need to use the sliders to modify the values for principal Amount (P), Time duration (N), and Rate of interest (R).

Follow these steps to compute your EMI Amount.

  • Use the slider for Choosing Loan Amount
  • Choose the Loan tenure in Months using the slider
  • Move the slider and choose the Interest Rate
  • Recalculate your EMI anytime by altering the input sliders
  • EMI will be calculated promptly when you move the sliders.

Principal Loan Amount: This is the original amount loaned to you by the bank/lender. The loan amount will vary on your needs and the purpose of the loan. Higher the principal loan amount, the more will be the EMI that you pay for the loan taken.

Tenure: The tenure of a loan refers to the total period given for the reimbursement of the loan. Since the repayment is done every single month, the tenure is computed in months and not years. So, a tenure of 2 years is equivalent to 24 months, and so on.

The rate of Interest: This is the rate at which interest is charged on the principal amount. The interest rate differs according to the type of loan taken and the lender (bank) from which you are taking the loan. The rate of interest has a direct impact on your EMI amount; hence, it is important to evaluate interest rates across banks before opting for a loan.

Factors Affecting Home Loan EMI

Numerous factors affect EMI calculation. Since the EMI depends generally upon the principal amount, tenure, and rate of interest, any shift in these variables can cause a change in the EMI amount.

Before this, one should know that there are many other circumstances upon which the Amount of home loan approved can vary. For example,

  • Salaried, Self- Employed Professional or a Businessman
  • Income
  • Age
  • Qualifications
  • Number of a dependent relative
  • Co-Applicants Pay Packet
  • Assets, Liabilities, Strength, and Stability of Occupation of the borrower
  • Funds History

Further, the loan entitlement will also be dependent on the value of property selected by you.

Advantages of Home Loan EMI Calculator

Home loan EMI calculator is a hassle-free simple universal calculator, where you don’t have to do anything except for entering the 3 values. Coming to the advantages, it is like you are conscious of what you are getting into. You have a clear picture of the loan amount that you will be granted, for how many months/years, the interest you will be compensating overall. This way you can plan all your finances beforehand.

Contemplating the same, you need to pre-plan from where will you arrange to repay the initial amount as well as the EMI every month, which again is a task in itself.

FAQs on Home Loan EMI Calculator

Q1: How can I use the Home Loan EMI Calculator to find the best bank to apply for a home loan?

A: Home Loan EMI Calculator is an extremely useful tool not only to calculate but at the same time to evaluate your EMIs of different banks. This way you can make an intelligent decision which bank to go for!

Q2: which one is better, Home Loan EMI Calculator or an Excel Calculator?

A: If you are decent with formulas, and know how to make use of excel well, then excel calculator is a great idea. Home Loan EMI calculator is customized or tailored made. Since it satisfies the need of calculating EMIs, so why to take so much of pain. Let’s save our energy for a little more!

Q3: Will the Home Loan EMI calculated provided by the bank be different than that calculated by the EMI Calculator?

No, not at all. It will be the same if you enter the same value everywhere. Please note that even a slight change, will result in an alteration in the final value. It’s all calculation, the output will hinge on upon the input.

Q4: Will the Home Loan EMI Calculator help me know how much EMI is owed after I repay a certain amount of principal as a chunk during the loan tenure?

A: Yes. If you enter in details of the balance outstanding principal and the tenure which is provided by the bank upon such prepayment, the EMI calculator will help you compute your EMI for the balance outstanding period.

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