Taking a housing loan is usually a pivotal financial decision in one’s life. It involves considering your income in the present and the future, along with your monthly budget. This long-term commitment can quickly become overwhelming if you do not properly plan for it. Using a home EMI calculator you can take the necessary steps to develop a robust financial plan to bear a home loan for several years to come. To know how this calculator can help you, you need to understand how it works.
How a Home EMI Calculator Works
These calculators are easily available online. Most banks and non-banking financial companies (NBFCs) have such calculators available on their websites. They are free to use and very user-friendly. This makes EMI calculators one of the best financial tools for potential borrowers.
While they can be used to calculate Equated Monthly Instalments (EMIs) for vehicle loans, personal loans, business loans, etc., they can also be used for calculating the EMIs of housing loans. However, to plan for a home loan, you need to use a dedicated home EMI calculator. These calculators work on a similar principle to the others.
They use the standard EMI calculation formula. You simply need to enter the loan amount, loan tenure, and the interest rate offered by the lender. Once this is done, the calculator easily computes and gives you the resultant EMI amount.
Why is it a Simple Tool for Loan Planning?
A home loan EMI calculator is often considered a simple tool for loan planning. This is because it offers several benefits and computational capabilities that can enable you to repay a home loan without default. Here are some of the reasons why they can help you easily pay off your housing loan.
1. It Helps You Budget Better
Using a home EMI calculator, you can have a preliminary idea of the amount you would have to part with each month in terms of home loan EMI. This calculator has sliders to adjust the values of the loan amount, the loan tenure, and the interest rate. By achieving a fine balance of all three values, you can achieve the most affordable EMI amount. The idea is to only take a home loan whose EMI you can comfortably pay off each month.
2. It Helps Compare Loan Offers Easily
Moreover, when you use such an EMI calculator, you can tweak around the housing loan interest rates to see which rate offers the optimum EMI amount. This means you can input different interest rates offered by various banks and NBFCs. As a result, you can easily compare loan offers from different lending institutions and make an informed decision. This can not only help you to easily pay off your EMIs each month, but also help you recalculate new EMI amounts after partial prepayment of the loan.
3. It Prevents Over-Borrowing
In some cases, you may be unsure of the exact amount you need to borrow to finance your dream house. To help with this, a home EMI calculator can give you the resulting EMIs based on different scenarios (i.e., different loan amounts, loan tenures, and interest rates). This can effectively prevent you from over-borrowing and then struggling to pay the EMIs each month. So, using this calculator as a simple tool for loan planning can be quite effective.
4. It Saves Time and Effort
Another reason you can use a home EMI calculator as a simple tool for loan planning is that it can save a lot of time and effort. These calculators compute EMIs using the standard EMI calculation formulae. Doing this manually can take a bulk of your time; time that could have been spent on more productive activities. Whereas an EMI calculator does all these calculations within a matter of seconds. This not only saves you precious time but also eliminates the need for repeated calculations.
5. It Gives You a Clear Repayment Plan
Using a home EMI calculator to compute the EMI amount for a housing loan is the first step in developing a realistic home loan repayment plan. By experimenting with different loan tenures and loan amounts, you can get a good idea of how much you need to borrow and for how long. If you wish to pay lower EMIs each month, then you can increase the loan tenure or reduce the loan amount, and vice versa. Getting the right balance is key to developing a clear repayment plan.
Final Thoughts
Before applying for a housing loan, taking a few minutes to use a home EMI calculator can save you from future stress. It is simple, fast, and gives you full control over your loan planning.
