How to Calculate EMIs Using a Home Loan Calculator

Posted by arwindsharma on October 25th, 2017

A Home Loan EMI is the monthly amount that you are required to pay towards a Home Loan. EMI or Equated Monthly Instalment comprises of a monthly loan amount plus the interest rate.  For instance, if you have taken a Home Loan of INR 40 Lakh for a period of 20 years, i.e., 240 months and you are required to pay INR 20,000 per month, then you will have to pay the same amount for the next 20 years on a monthly basis. The amount that you pay on a monthly basis is known as the EMI.

What is a Home Loan calculator?

A Home Loan Calculator is a user-friendly simple calculator which is available online. Majority of the financial institutions have the Home Loan calculator on their websites. The EMI calculator requires you to put in values, and it derives results almost instantly.

How to calculate Home Loan EMI?

When it comes to calculating a Home Loan EMI, three variables need to be taken into consideration. These three variables include – loan amount, the Home Loan interest rate, tenor of the loan.

Loan Amount: The amount of loan that you borrow from a financial institution. It is the total sum that you borrow.

Interest rate: The interest rate is the amount of interest charged by the lender while providing you with the loan. The Housing Loan interest rate is the amount that you are required to pay monthly and is an important factor in your EMI.

Tenor: Home Loans come for a period of 15 to 20 years and can be extended up to 30 years. Tenor plays a crucial role in the repayment process. A longer tenor requires you to pay interest for a longer period and vice-versa.

Let us consider three scenarios and based on that, let us understand how to use a Home Loan calculator:

Case 1 - Original scenario

Home Loan Amount: INR 20 Lakh

Tenor: 240 months

Rate of Interest: 10%

When you put these values on the EMI calculator, you get an EMI of INR 19,300. Thus, if you decide to take a loan amount of INR 20 Lakh for a period of 20 years at 10% rate of interest, you will have to pay an EMI of INR 19,300. Similarly, if we change the variables, changes will occur in EMI.

Case 2 – Changing the interest rate

Home Loan Amount: INR 20 Lakh

Tenor: 240 months

Rate of Interest: 9%

When you put these values on the EMI calculator, you get an EMI of INR 17,995. Thus, if you decide to take a loan amount of INR 20 Lakh for a period of 20 years at 9% rate of interest, you will have to pay an EMI of INR 17,995. A change in interest rate will bring about considerable change in the EMI.

Case 3 – Changing the tenor

Home Loan Amount: INR 20 Lakh

Tenor: 180 months

Rate of Interest: 10%

When you put these values on the EMI calculator, you get an EMI of INR 21, 492. Thus, if you decide to take a loan amount of INR 20 Lakh for a period of 15 years at 10% rate of interest, you will have to pay an EMI of INR 21, 492. Thus, a change in tenor will bring about a change in the EMI amount.

Case 4 - Increasing the loan amount

Home Loan Amount: INR 30 Lakh

Tenor:  240 months

Rate of Interest: 10%

When you put these values on the EMI calculator, you get an EMI of INR 28, 951. Thus, if you decide to take a loan amount of INR 30 Lakh for a period of 15 years at 10% rate of interest, you will have to pay an EMI of INR 28, 951. Thus, a change in the Home Loan amount will bring about a massive change in the EMI.

The scenarios above are the examples of how the EMI can be calculated using the Home Loan calculator. If you are looking forward to using a Home Loan EMI calculator, try Bajaj Finserv’s Home Loan calculator, it is quite user-friendly, and it derives instant results.

Find out more about loans, here:

http://understanding-loans-and-lending.blogspot.com/

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