How to Calculate Home Loan EMI

When you apply for a home loan, you may want the EMI to be affordable so that you can repay the amount consistently throughout the tenure without default. So, what if you can calculate the exact EMI payable before applying for the loan. Read on to know how you can do so. 

A home loan is one of probably one of the biggest credits you may avail in your life. Typically, the home loan tenure lasts for 15-30 years, which means you are obliged to pay the EMIs (the principal amount and the interest) throughout the chosen term. Since it is a big value loan, you must plan your finances well and consider the affordability before applying for the loan. 

You must be comfortable paying a part of your income towards the EMI (Equated Monthly Instalment). To help the home loan applicants plan their EMI payments well, today most lenders in India offer a free home loan EMI calculator, an online tool on their website. Let us find out how this helps you calculate the home loan EMI and its benefits. 

What is a home loan EMI calculator?

A home loan EMI calculator is an online tool that helps the borrowers to calculate the exact EMI amount payable to the lender. The easy-to-use tool requires you to enter certain details, and based on the input; the calculator computes the figure. The important fields in the tool, include:

  • The principal amount (the loan amount you wish to apply for)
  • The loan tenure (the period for which you wish to avail the credit). Most calculators require the borrowers to enter the duration in months
  • The interest rate (the rate of interest levied by the lender)

As a borrower, you can enter the above details innumerable times and try different permutations and combinations of different interest rate, tenure to determine an EMI that is affordable to pay. The easiest way is to keep the principal amount constant and adjust the internet rate and the term to determine the figure. 

Home loan EMI calculation formula

Generally, the home loan EMI calculator uses the following formula to compute the EMI:

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

In the above formula,

P is the principal amount

R is the interest rate

N is the repayment tenure

Benefits of using the home loan EMI calculator

Now that you know how to calculate the home loan EMI with the EMI calculator, it would help you to understand the benefits of using this tool. 

  • It gives you an accurate breakup of the charges involved

An EMI calculator not only helps you compute the exact EMI payable but also helps you understand the various charges associated with the home loan repayments, including the loan processing fee, interest charges, stamp duty, etc. The tool gives you an accurate breakup of the amount so that you know the actual cost of the loan.

  • Saves time and efforts from manual calculations

Calculating the EMI amount manually using pen and paper or on excel can seem overwhelming. Besides, there is always the risk of committing human errors, which in turn can put off your calculations and financial planning. By using a home loan EMI calculator, you can avoid such hassles and get accurate results with minimal efforts. 

  • Helps you compare various home loan rates

 Different lenders have different home loan interest rates. Even if the difference is meagre, it can still make a significant difference to the overall loan cost in the long run. The EMI calculator allows you to compare the EMI amount with different interest rates, and help you choose the best home loan offer so that the repayment is easier. 

Final Word

You can easily calculate the home loan EMI with the EMI calculator. It is an excellent tool that allows you to know the exact amount payable beforehand and help you manage your repayments more efficiently.