All you need to know about an EMI Calculator.

Posted by Anurag Mishra on July 31st, 2017

Thinking about taking a home loan? Then the term EMI will soon become an unavoidable part of your life. EMI or Equated Monthly Installment is the amount you pay the lender every month on account of the home loan you’ve taken. The EMI is deducted from the loan amount until the amount is completely paid off.

Your EMI is made up of two components. The first is the principal repayment amount; this is the actual loan amount that needs to be paid back during the tenure of your loan. The second component is the interest rate, this is the additional cost the lender takes in exchange for providing you a home loan. This is a percentage of the outstanding amount payable and keeps changing after every EMI payment.

Say you finally decide to go for a home loan after consulting with your friends, family and relatives, then the first thing you need to do is calculate whether or not you can afford to take one. This would mean physically exercising your mathematical prowess or using complicated formulae on Excel to determine what kind of EMI you would have to pay every month. It sounds simple but it’s far from easy, and can become a very tedious process. You have to recalculate the interest rate applicable after every month and then calculate the EMI amount for that month. And you cannot skip the calculation as that might lead you to financial distress.

However, there is a tool that potential home loaners can use to mitigate the mentally taxing process of calculating EMIs. It’s called an EMI Calculator. This tool takes into account the specifics of your home loan needs to determine the EMI you will have to pay.

You have to feed it with your ideal loan amount, the tenure you wish to take the loan for and the interest rate you are happy to pay. Some calculators will even ask you to key-in the processing charge you are willing to pay. After taking into these parameters, the calculator will determine the EMI you have to pay every month.

Not only that, it will give you a month by month break-up of your repayment schedule. It will tell you the balance after every EMI payments and tell you both principal and interest repaymentamounts of every EMI you will have to pay.

The benefit of using an EMI Calculator is that you can properly plan you repayment. You can budget your expenses better and make adjustment to pay the EMI. This is a very big advantage of the calculator, but besides this, it also helps you arrive at a loan amount you can afford. Also, knowing the loan amount will also help you calculate & arrange for the down payment amount. Seeing that you borrowing within your capabilities and that you’ve arranged for the down payment, the lender may also provide speedier approvals.

Wondering where you can get an EMI Calculator? Well, most of the lender’s provide you a calculator on their website. Some home loan aggregators provide calculators on their sites as well. You should definitely use one before applying for a loan.

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Anurag Mishra

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Anurag Mishra
Joined: December 13th, 2016
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