Home loans are one of the most suitable financial options for those who want to avail of funding for the purchase, renovation, or construction of their house. One of the most crucial parts of a home loan is its EMI or equated monthly installments. Borrowers pay off the credit that they have availed from the lender through EMIs paid every month for a fixed number of years.
EMI comprises of two components – loan principal and interest. A home loan EMI is decided by three factors, which are – your loan amount, tenor or the repayment period, and rate of interest set by your preferred lending institution.
Thus, the mathematical formula used to calculate the loan EMI is
EMI = [P x R x (1+R) ^n] / [(1+R) ^ n-1]
Here, P = principal, R = rate of interest and n = number of monthly instalments
Most applicants may find the above formula to be complicated. In that case, he or she can also take the help of online tools such as an online home loan calculator to compute the EMI by himself or herself quickly. Most lenders provide this tool on their website. The steps below will guide you through the process –
- Visit your lender’s website and go to its home loan section.
- Click on the housing loan EMI calculator.
- Enter your loan amount, repayment period, and interest rate.
- After entering these details, the calculator will show the EMI, the total amount payable, and the total interest amount.
Before entering the interest rate, borrowers should decide whether to opt for a fixed or floating interest rate as EMI will vary based on the type of home loan interest rate.
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Benefits of a Home Loan EMI Calculator
There are several benefits of using online tools like home loan EMI calculator. These include:
- A housing loan EMI calculator will enable borrowers to compute the exact EMI reducing the chance or errors since the calculations are not carried out manually.
- Moreover, applicants can use this calculator even before applying for a home loan to gain an idea about the amount that they are required to pay every month.
- They can adjust the loan amount and tenor period to know the most cost-effective EMI options and plan their budget accordingly.
- Borrowers can also use the calculator to compare the various home loan interest rates offered by lenders.
Home Loan Eligibility Criteria
Besides using a housing loan EMI calculator to know the EMI, borrowers should also go through the eligibility criteria specified by the lending institutions to see whether they meet the required conditions. Additionally, they should also know the factors that can affect their home loan eligibility.
The essential home loan eligibility criteria that individuals need to fulfill before applying for a loan are –
- They should be a residing citizen of India
- Minimum income to apply for a home loan is Rs.25,000
- Salaried applicants should have work experience of a minimum of three years, preferably at a reputed MNC, public or private sector.
- Self-employed individuals should have a business operating for a minimum of three years.
- Applicants should have a high CIBIL score of 750
Additionally, some lending institutions also provide pre-approved offers on home loans for a hassle-free and quick application process. These offers can also be availed on other secure investments such as mortgage loans, property loans, etc. A borrower can check their pre-approved offers by providing nominal details which include their name and contact information.
Applicants can also refer to a loan amortization schedule which displays all the EMIs for the repayment period. It shows the principal amount and the interest amount for each installment. This schedule will enable borrowers to know how many EMIs have been paid off to date and the outstanding amount that they owe to the lender. Consequently, it will help them to determine when to foreclose or to part-prepay the loan to reduce burden.