Home loans can keep individuals occupied in their debt repayment obligations for a prolonged period. So, they must consider taking this credit advance for a short tenor but at an EMI amount that does not affect their financial equilibrium. Otherwise, it may hamper their monetary liabilities, leading to home loan EMI default in the utmost scenario.
Apart from the penalties, negligence in repaying a single EMI can cause a plummet of 50-70 credit score points (1). To stop this from happening, individuals can utilise a home loan EMI calculator for planning finances for the upcoming days. It can help them pay off their dues conveniently in a planned manner.
What is a home loan EMI calculator?
A home loan calculator is a virtual tool that most lending institutions in India provide to help their customers determine EMIs for a loan tenor. Individuals can easily use this calculator by providing required inputs in the designated boxes, such as interest rate, tenor, and home loan amount.
Individuals must also know how to utilise this calculator to get the desired instalment amount.
Step-by-step process to use a home loan EMI calculator
Here are the steps following which individuals can check their instalment amounts:
Step 1: Access this home loan EMI calculator from the official websites of a lender
Step 2: Enter the interest rate, tenor and loan amount. Reduce or increase the tenor until you do not get the suitable instalment amount.
After these easy steps, individuals can get to know their EMI amount and outgoing interest from the calculator page.
Determining instalment amount using a home loan calculator
Individuals must get an EMI amount within their range for successful and hassle-free loan repayment. Using this home loan calculator, they can easily understand what their home loan instalment amounts would be at a certain tenor. They only need to reduce or increase the loan tenor in this tool. It will help them discover which repayment period it will not be difficult for them to repay the debt.
For example, an individual wants to get a home loan of Rs.10,00,000 for a specific repayment period at a pre-determined 8% interest rate. With his/her fixed monthly income, it will be convenient if the loan amount is lower than Rs.15000. Providing the inputs in this calculator, he/she can find that at a loan tenor of 8 years, the EMI amount is Rs.14,137, which is below Rs.15000.
Once individuals are aware of the working of this virtual calculator, they must know about its utility in financial management.
Benefits of home loan EMI calculator in financial planning
Following are the ways individuals can leverage this virtual calculator before applying for a home loan.
- Balancing monthly expenses
Generally, individuals’ instalment amount becomes their largest expense till the completion of their tenor. However, apart from this, they have other financial obligations such as children’s education and household expenditures as well. It will be difficult for them to cope with all these additional expenses if the home loan instalment is significantly higher and wash out most of their savings.
To manage this prudently, individuals need to approximate their monthly expenses and savings at first. Then, after deciding on the manageable EMI, they require to use this calculator to determine a suitable loan tenor.
- Maintaining contingency fund
A contingency fund helps individuals to bear financial emergencies. In fact, they can pay off some of their loan dues from this fund to avoid EMI default and its associate penalties. After knowing the EMI amount using this calculator, individuals can do proper financial planning to put forward a certain percentage of savings every month towards this emergency fund.
- Determining the suitable lender
The home loan interest rates and processing charges, service costs etc., vary across the lending institutions. All these substantially influence their total cost of borrowing.
So, to stay at an advantageous point, individuals need to apply for a home loan from a lender in which the cost of borrowing is lower. The housing loan EMI calculator can help them compare the amount of interest outflow against interest rates provided by several lenders. It will help them choose the most suitable lender to lower their overall borrowing cost.
In this circumstance, individuals need to know that they can get a lucrative interest rate only after meeting the eligibility criteria for a home loan. So, before applying for a home loan, individuals need to check these requirements from the official websites of their lenders.
While applying for a credit advance for house construction, individuals need to check their pre-approved offers that lenders extend on products such as home loans and loans against property. Individuals can substantially reduce the loan processing time by accepting these benefits. For this, they need to mention their names and contact details only.
In conclusion, individuals can know at what tenor they can get a suitable instalment amount using a home loan EMI calculator. This insight can significantly help them during the home loan application as they can independently make informed decisions regarding the tenor.