How Can a Home Loan EMI Calculator Help you Plan your Finances Better?September 13, 2022
Opting for a high-value credit mode like a home loan calls for effective long-term planning. The availability of affordable borrowing options often leads individuals to overborrow. This can result in unnecessary repayment and eventual default.
A great way to avoid unnecessarily burdening your financial reservoir is using a calculator for home loan. Using this tool, individuals can quickly assess their financial obligations and probable EMIs beforehand and choose their borrowing schemes cleverly for effective financial management. For that, they first need to know how to use this online tool.
How does a home loan calculator work?
Using a house loan calculator is extremely simple. Individuals only need to enter the following details:
- Requisite loan amount
- Repayment tenor
- Applicable interest rate
Based on these inputs, the calculator will produce results for an individual’s EMI payment using the following formula:
A = [P x R x (1+R)^N]/[(1+R)^N-1],
Here A denotes the EMI amount, P stands for the required loan amount, N depicts repayment tenor, and R indicates the interest rate.
Prospective borrowers can also view their repayment schedules by entering the date they want to commence this loan. This can help individuals have prior knowledge of their expenditure towards this fund and plan their finances accordingly.
What are the benefits of a home loan calculator for effective financial planning?
Following are some ways in which individuals can benefit from using a calculator for a home loan:
Using the EMI calculation formula to make manual loan calculations can be time-consuming. Additionally, individuals may find it challenging to conduct comparisons among different lending rates and other factors manually. Using an automated calculator helps individuals get these outputs within a matter of a few seconds. All they need to do is enter the required inputs as previously mentioned.
Besides being time-consuming, manual calculations can also lead to errors. Miscalculation of long-term liabilities like a home loan can lead to misses in a borrower’s entire financial management. Instead, using an online calculator reduces the chances of erroneous results to zero and aids in better planning.
As already mentioned, a home loan EMI calculator is extremely easy to use. Such an online tool is also easily accessible. Almost all lending institutions provide an online EMI calculator on their official websites that interested individuals can use free of cost.
Easy and quick comparison among schemes
One of the benefits of calculating EMIs before taking a home loan is that users can easily compare the loan terms of varying interest schemes that different lenders offer. This will help borrowers choose their most suitable lender as well as loan scheme before applying for one. This will also help individuals avail affordable repayment.
Correct tenor selection
One of the crucial parts of effective loan management is choosing the right repayment tenor. While a long tenor may offer individuals the benefit of smaller EMIs, it results in greater interest accumulation. Therefore, a shorter tenor makes for a better option to lower the overall interest outgo. Using an online loan calculator can help individuals figure out ways to reduce the home loan tenor and EMI so that the repayment terms meet their convenience. This will prevent borrowers from overburdening themselves with unnecessary repayment and pay off their loans faster and effectively.
Maintenance of better credit profile
Using a calculator for a home loan to determine EMIs in advance helps borrowers plan and manage their expenses better, curbing chances of late repayment or default. Timely EMI payments, in turn, helps boost one’s credit score. Maintaining a healthy credit score also paves the way for future loan approval.
Several financial institutions also pre-approve such funds to speed up this approval process. Individuals looking for such funds can check their pre-approved loan offers before applying by providing their name and contact information.
Thereafter, individuals should check their lender’s terms and conditions and documentation requirements to avail a hassle-free application.