Getting a Home Loan is a huge commitment. It is a huge amount that will involve EMI payments for several years, and so needs careful planning. Before you get a loan, use a Home Loan Calculatorand find what amount you can ideally borrow that will allow you to pay the EMIs you can afford.
Home Loan Calculator
A Home Loan Calculator can help you calculate the EMI on the loan amount you want. The formula to calculate the EMI is a bit complex. Doing it manually can result in errors. With online EMI calculators, you will get accurate results that will help you decide the loan amount you can get for the largest EMI you can afford.
- The EMI is the Equated Monthly Installment that you have to pay each month to repay the loan. This amount is composed of two components – the principal, and the interest. Your EMI is divided into payment towards the principal and payment towards the interest.
- In the initial years, more amount goes towards the interest than towards the principal. Later, the EMI goes more towards the principal, bringing down what you owe.
- A Home Loan eligibility calculator, as the name suggests will help determine the loan amount you are eligible for at the terms you consider ideal. These terms include the highest EMI you can afford on the loan, interest rate, and the tenure.
- Online housing loan eligibility calculatortools let you input several different parameters to arrive at the ideal loan amount. You can try different loan amounts, change the tenure and interest rate, to find the ideal EMI, loan amount, and tenure for your budget.
- The best thing about these online Home Loan eligibility calculator tools on loan marketplace websites is that they can search the financial marketplace for offers from various vendors and present you with the best results for your desired loan terms.
- If you try to do this yourself, calculating loan amounts and EMIs for different offers, even a small error can result in making you opt for a loan that might end up costing you much more in interest and EMI than your calculations showed.
Home Loan Interest Calculator
The main concern when you are choosing a loan amount should be the interest charged by each vendor. Whether floating rate or fixed rate, the interest amount on Home Loans in the end usually works out to be more than the actual amount borrowed. This is because of the long tenures of Home Loans.
Online Home Loan calculators are actually two calculators in one. The first tool is the Home Loan interest rate calculator, which calculates the interest amount on the loan. Then the EMI calculator part takes into account this interest and adds it to the borrowed amount to give you an accurate picture of what you will actually be paying.
The EMI Formula
The formula for calculating the EMI on a loan is, EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here, P is the Principal, that is, the loan amount. R is the interest rate in terms of monthly interest expressed as a decimal. Generally, interest is specified in annual terms. So, if the interest on your loan is 10%, then the monthly interest will be R/(12 x 100), here 10/(12 x 100) = 0.00833.
N is the loan tenure in months. If your loan tenure is ten years, then N will be 10 years into 12 months that is 120 months.
Make Life Easier, Use Home Loan Eligibility Calculator
Keeping track of all the different factors in the EMI formula while you do manual calculations for different loan terms from one vendor is difficult enough. You will have to find the EMI you will pay for various Interest rates [R], and various tenures [N].
Each time you have to be sure that you have correctly converted the interest rate into monthly rates and the tenure in terms of a total number of months.
Imagine doing this for offers from many different loan providers, different banks, and NBFCs. This is definitely going to be a complex and error-prone process. Using an online EMI calculator, Home Loanoffers become easier to deal with and easier to pick.
These Home Loan Calculators quickly do these computations for any number of offers and show you the result for the best offers that suit your needs. Besides showing you what you have to pay in EMIs and the interest you have to pay, these housing loan eligibility calculators may also give you a split up of the payment schedule.
This may not be exact as the amortization schedule for each offer may vary depending on the vendor. However, this split up gives you an idea of the number of months you will be paying the EMI for, the amount you will have to set aside each month, even the split up of your EMI between the principal amount and interest amount each month for the whole tenure.