- Benefits of calculating EMI before availing a home loan
- Factors to consider before availing a home loan
- How to calculate a home loan EMI?
Borrowers planning to avail a housing loan can easily estimate the loan EMI using a house loan calculator. It helps them know the exact EMI they need to pay against the borrowed sum. There are many ways in which calculating the EMI amount beforehand can help a borrower.
Here are some of the top reasons to determine the loan EMI before applying for a house loan.
Benefits of calculating EMI before availing a home loan
One can use an online house loan calculator as:
- Helps decide the loan amount
If borrowers calculate the home loan EMI before availing the loan, they can determine the exact amount that has to be paid each month. It will help them decide a loan amount according to their affordability.
To pay a fixed amount as instalment each month without affecting the other monthly expenditure, one needs planning. A housing loan EMI calculator will help borrowers to know their exact EMI amount and choose the loan amount as per the budget.
- Aids in planning the repayment
Once a borrower knows how much he can borrow, considering the housing loan interest rate, he can choose the tenor accordingly to pay a suitable EMI amount. Besides, one can assess one’s monthly expenses and check whether one can cut down any negligible expenses to make the repayment conveniently. It will help in paying the loan in a timely manner.
- Helps plan prepayments
After knowing the exact monthly payable amount, borrowers can plan prepayments to reduce their interest outflow. For example, they can put a higher down payment or opt for part-prepayments to easily repay the loan amount before time. It will help them pay off their loan amount within the estimated tenor and maintain a good credit score.
Factors to consider before availing a home loan
Top factors that can affect one’s loan EMI amount.
- Income
A borrower’s monthly income plays a major role in deciding the EMI amount. One should ensure that not more than 35% of the monthly income should go towards loan EMI payment. It will help borrowers to meet their other monthly expenses effortlessly.
Moreover, they should keep at least 15% of their income aside for savings considering emergency situations such as inflation or other urgent requirements. Various lenders have varying income-related eligibility for home loans.
Nowadays, borrowers can know about their eligibility to apply for a loan by using the home loan eligibility calculator from the lender’s website. It will help them determine if their income is suitable to avail home loan or not.
- Expense
Future expenses, such as education, wedding, vacations, medical emergencies, etc., should be calculated with the present expenses while deciding on the loan. Besides, inflation can also affect income and increase a borrower’s expenses. So, borrowers must ensure having adequate funds for their necessities before applying for a house loan.
- Rate of interest
Calculating the interest rates on a home loan before deciding the loan amount is necessary for a hassle-free repayment plan. Borrowers might get attracted to the low-interest rates and opt for a huge loan, which can affect their expenses during emergencies. One should determine the loan amount that one needs to borrow and also keep in mind the various charges and fees.
Besides, borrowers can check if they are eligible for pre-approved offers. It Lenders provide these offers on various financial products like loan against property and others. Such offers will help in streamlining the loan application process. Borrowers can enter their basic details like names and contacts and check their pre-approved offers before applying for a home loan.
How to calculate a home loan EMI?
Borrowers can calculate their EMI amount in two ways. Firstly, they can use the manual calculation procedure, i.e., mathematical calculation. Secondly, they can use a house loan calculator to assess the exact EMI amount.
- Manual calculation
The manual calculation is carried out following this formula:
P x R x (1+R) ^N / [(1+R) ^N-1]
Here, “P” denotes the principal or loan amount, “R” denotes rate of interest, and “N” denotes the loan tenor in months.
- Housing loan EMI calculator
Here are steps to follow while using a calculator for home loan EMI computation:
Step 1: Visit the lender’s website
Step 2: Navigate to the home loan EMI calculator
Step 3: Enter the loan amount, tenor and interest rate in the box provided
Step 4: Correct EMI will be displayed on the page
Thus, calculating the EMI amount before availing a decided loan amount is a smart move to repay the borrowed amount conveniently.
