Buying a new home is one of the biggest financial decisions you can make. And given the current inflation, financing such a major purchase entirely from your savings is often not financially feasible. This is where home loans become a practical solution, allowing buyers to secure their dream home without exhausting their savings.
However, every loan comes with Equated Monthly Instalments (EMIs), which are fixed monthly payments that are made towards repaying the borrowed amount. EMIs help spread the cost of a home loan over several years, making repayment manageable for the borrower. Understanding your EMI in advance is helpful for strategic financial planning.
Benefits of EMI Planning
Helps Plan a Budget
Knowing your exact EMI amount in advance helps you clearly understand your monthly financial obligations. By setting aside a specific amount for EMIs first, you can prioritise essential expenses, plan financial goals, reduce unnecessary expenses and ensure your monthly income is allocated more effectively.
Financial Discipline
Having a clear plan of your monthly obligations is a great way to ensure financial discipline. When you commit to a fixed monthly payment, you automatically start managing your lifestyle expenses better and maintaining a healthy financial routine.
Timely Loan Repayment
Proper planning means you won’t miss deadlines or default on your loan payments. Making EMI payments on time not only helps maintain a good credit score but also saves you from late payment penalties or defaulting on your loan.
Planning your EMIs not only reduces stress but also ensures you stay in control of your budget and long-term financial goals. A key tool that can help in EMI planning is an EMI calculator.
A home loan EMI calculator can be used to estimate your expected monthly loan obligations based on the loan terms, including loan amount, interest rate and loan tenure. You can explore different EMI outcomes by adjusting these variables and choosing a loan that aligns with your budget and financial capabilities.
Step-by-Step Guide to Home Loan Calculators
Step 1: Start by selecting a reliable and accurate EMI calculator. Both banks and NBFCs provide their customers with free online tools on their websites. Prefer calculators that provide an amortisation schedule and allow you to download the results.
Step 2: Input the right details, including the loan amount you intend to borrow, the interest rate offered by your lender and the desired tenure. Most calculators accept tenure in both years and months.
Step 3: Click the Calculate button to receive an estimate of the EMI amount, the total amount payable (principal and interest), and the amortisation table that outlines the periodic payments made against the loan.
Using an online EMI calculator for a home loan empowers buyers to explore different loan scenarios. It allows you to customise your loans, maintain budgetary discipline and make homeownership a reality without financial stress.
Common Mistakes to Avoid During Home Loan EMI Calculation
- Not testing several scenarios – While planning EMIs, test several loan scenarios by changing the loan tenure and interest rate option to see how they impact the EMIs.
- Choosing the Wrong Tenure – Choose a loan tenure that offers more affordability in your EMI payments. Don’t choose an EMI you cannot afford.
Home loan EMI calculators help simplify complex EMI calculations. Rather than manually calculating EMI, which can sometimes get confusing and time-consuming, a handy tool like an online calculator eliminates the guesswork out of the process and makes decision-making straightforward. The key lies in planning ahead of time.
