Everything You Need to Know About Using a Home Loan Calculator

Looking for a suitable loan to finance your dream house? There are many lending institutions you can choose from that offer attractive home loan interest rates. But how do you know which one is the most suitable for your budget? You can do this by using a house loan EMI calculator. Such a calculator is readily available online and lets you calculate the monthly EMIs for a potential home loan. However, to effectively use a home loan calculator, you need to know what it is and how it works.

What Is a House Loan EMI Calculator?

It is a user-friendly online calculator that uses the standard formulae for computing Equated Monthly Instalments (EMIs) for a loan. To use this calculator, you need to input three values, which are:

• Loan amount: This is the amount you want to borrow from the bank or a non-banking financial company (NBFC). This amount will directly correspond to the price of the house you wish to purchase.
• Loan tenure (in months or years): This is the duration for which you wish to repay the home loan. You can increase or decrease this value to have a lower or higher EMI amount, respectively.
• Home Loan Interest Rate: This is the interest rate charged by the lending institution. If your bank or NBFC offers a higher interest rate, your resultant EMI will be higher. However, if you are offered a lower interest rate, your EMI will also be lower.

After you fill in these values, the house loan EMI calculator will automatically compute the monthly EMI you need to pay.

Why Should You Use It?

Before using this calculator, you need to understand why people use it. Due to their high values, home loans can last several years (sometimes a couple of decades). This is why seasoned real estate investors and experienced home buyers use this calculator before applying for a home loan. They know that experimenting with a house loan EMI calculator with different loan amounts, loan tenures, and interest rates can help them arrive at the most suitable EMI amount that is within their budget.

Here are some of the reasons why using a home loan calculator should be a best practice before (and sometimes even during) applying for a home loan.

1.   Compare Loan Offers Easily

Using a house loan EMI calculator, you can easily compare loan offers from different lending institutions. Since different lenders offer different interest rates, it makes sense to calculate their corresponding EMIs before choosing the right lender. Moreover, there are some hidden charges like processing fees and EMI default penalties. When researching different lenders and their home loan offers, you can also learn about these hidden charges and plan for them accordingly.

2.   Decide the Right Loan Tenure

With the help of a house loan EMI calculator, you can also decide the right loan tenure for your income slab. Choosing a longer loan tenure will reduce the EMI, and vice versa. So, if you have a lower monthly income slab, then choosing a longer loan tenure will be more financially feasible for you. You could also check with different home loan interest rates that various lenders offer. Using a combination of these variables, you can finally achieve the most affordable EMI for you.

3.   Get Full Control Over Repayments

When you know your EMI in advance, you can plan your monthly expenses better. You can also avoid borrowing more than you need. A house loan EMI calculator gives you this control and helps you stay within your financial limits. Moreover, it also helps you understand how home loan interest rates affect your repayment. If you find that a certain rate makes the EMI too high, you can look for better offers or wait for a better time to apply.

4.   Plan for Partial Repayments

Some people want to pay off their loans early. If you plan to make extra payments later, you can also use the calculator to see how that will affect your EMI or loan term. This kind of planning can save you a lot of interest over time. Even small changes in the loan amount or interest rate can make a big difference. The house loan EMI calculator helps you see these changes clearly, so you can make smarter choices.

Final Thoughts

Taking a home loan is a big decision. But with the right tools, it becomes easier to manage. A house loan EMI calculator is one such tool that helps you plan your repayments smartly. It saves you from financial stress and lets you compare options before you apply.

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