A home loan is a high value financial factor in one’s life that keeps the borrower indebted until the principal loan amount and the interest is paid off in full. Since home loans are one of the biggest loans, one must consider their finances and affordability before taking them.
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Research on interest rate, calculation of principal amount and EMI payments are the first things to do. Thus, to understand the nature of EMIs, banks provide a free online tool, known as the home loan EMI calculator. This calculator helps you find out how much your EMIs would be for the desired sum at the specified interest rate over the course of the loan. The EMI calculator has many time saving benefits, however, very few know how it works. Here’s all you need to know about home loan EMI calculators.
What is a home loan EMI calculator?
An EMI calculator is a free online tool that helps borrowers compute the payable EMI amount against the home loan. There are three basic components of the home loan EMI calculator that the borrower needs to feed in for the calculations. These are:
How does the home loan EMI calculator work?
An online EMI calculator uses a mathematical formula for the calculation of monthly instalments (EMI) of your home loan based on the inputs given.
The mathematical formula is EMI = P x I x (1+I) ^T]/
Here,
‘P’ is the principal loan amount
I’’ is the monthly interest rate
‘T’ is the number of months or the tenure of the loan in months
The monthly interest rate is calculated by dividing the annual rate of interest by 12 multiplied by 100.
To understand this better, here is an example. If a borrower takes a home loan of Rs 10,00,000 at an annual interest rate of 7.2 percent for a tenure of 10 years (120 months) then his/her monthly EMI will be calculated as follows:
EMI= Rs 10,00,000 * 0.006 * (1 + 0.006)120 / ((1 + 0.006)120 - 1) = Rs 11,714.
Therefore, the total amount payable will be Rs 11,714 * 120 = Rs 14,05,680
This means for a Principal loan amount of Rs 10,00,000 the Interest amount will be Rs 4,05,680.
Thus, calculating the EMI manually using the formula can be tedious but it becomes easier with a home loan EMI calculator.
(Edited by : Sudarsanan Mani)
First Published: Jul 23, 2022 1:35 PM IST
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