The preparation for availing of a home loan begins with proper research and estimating financials. This includes evaluation of monthly payments, downpayment, etc. But, most importantly, knowing how to calculate loan EMI has prime importance. This will allow prospective borrowers to pre-plan their financials to avoid misfortunes afterward.
How to calculate home loan EMI?
Prospective borrowers can opt for several methods to calculate home loan EMI. These methods are:
- Using Excel: Using an Excel spreadsheet, individuals can compute house loan EMIs with the PMT function. In this case, prospective borrowers need to input three variables: the interest rate, loan amount, and loan tenor. The PMT formula is (rate, nper, pv). Even though it just takes a few minutes, this method is sometimes prone to provide incorrect answers. Additionally, individuals must know the formula and have good Excel skills to evaluate.
2. Derivation through the formula: To derive EMI through the formula, borrowers must be ready to perform some complex calculations. The formula is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
P = Principal, R= rate of interest, N = tenor or number of EMIs.
Borrowers must note that this approach requires a complicated calculation that can take a lot of time. Additionally, there is a considerable chance of computation error. So, instead, individuals can choose a home loan EMI calculator that uses this formula to guarantee accuracy while saving time.
3. Home loan EMI calculator: Almost all leading financial institutions provide an EMI calculator for ease of calculation for prospective borrowers. You can follow these steps to calculate the monthly payable:
- Visit the official portal of your preferred lending institution.
- Navigate to the home loan EMI calculator section from the home loan page.
- Enter the loan amount and tenor.
- Then, input the home loan interest rate.
- Finally, click on “Calculate” or adjust the scales to get financial information.
After providing details in the home loan calculator, individuals will get detailed information within seconds. Additionally, using this online calculator makes the entire process fast and hassle-free.
Benefits of using the home loan EMI calculator
Opting for an EMI calculator has multiple benefits. A few of the most prominent ones include:
1. Fast and hassle-free calculation
Manual computations have a significant probability of yielding inaccurate results. Additionally, the procedure can be daunting and tiresome. So, customers who want to know their EMI amount can use this calculator. They only need to enter the loan amount, interest rate, and loan term to get the desired value.
2. Assists in loan management
Borrowers occasionally have extra money sometime during EMI payments of the housing loan that can be used for prepayments. In this regard, a home loan EMI calculator will assist a borrower in evaluating and determining how the prepayment will aid in repaying the loan before the term expires.
3. Assures accuracy
Opting for manual methods of calculation is prone to error and can lead to miscalculation. On the contrary, since all analyses are performed with 100% accuracy, this calculator will never display results that are incorrect.
Apart from using this calculator, prospective borrowers can also look for pre-approved loan offers to expedite the loan application process. This offer is available on various financial products such as home loans, loans against property, etc. To check their pre-approved offers, candidates must enter their name and contact number.
So, knowing how to calculate loan EMI is of prime importance when a home loan application is concerned. Regardless, most leading financial institutions always advise opting for an EMI calculator for accurate and fast results.