Step by Step Guide: How to Use a Home Loan EMI Calculator

A home EMI calculator is a handy online tool that allows the home loan borrowers to compute the EMI beforehand. But, not many people know how to use it. So, in this write-up, we discuss how to use it.

When you start comparing home loan offers or talk to a loan officer, you may invariably deliberate about the EMI. It is a critical aspect of a home loan, and your decision to borrow and choosing the right amount and tenure hinges on the EMI amount. But what is home loan EMI?

The EMI or Equated Monthly Instalment is the amount that you repay to the lender every month in lieu of the amount you borrow to fund the purchase of your dream home. The EMI amount depends on a variety of factors like the amount you want to borrow, the loan tenure, and the interest rate.

Another important factor to know about the home loan EMI is that it consists of both the principal amount and the interest component. Knowing the EMI payable beforehand can help you plan your finances accordingly and make necessary arrangements. This is where the EMI calculator plays a critical role.

How does the home loan EMI calculator work?

Most the home loan EMI calculator use the following mathematical formula to calculate the EMI –

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

In the above formula, P represents the principal amount, i.e., the amount you borrow, R is the interest rate levied by the lender and N signifies the loan term, i.e., your repayment tenure.

All the components P,R,N are variables, which means the EMI amount will vary as you change the value of these variables.

Let us understand this calculation with an example

Let us assume that you avail a home loan of Rs. 50 lakhs at an interest rate of 12% for about 10 years, so the approximate EMI will be

EMI = [5000000 x 0.01 x (1+0.01)^120] / [(1+0.01)^120-1]

As per the above calculation, EMI would be about Rs. 71,700

Now that you know how the calculator works, it would help you understand how to use it.

How to use the home loan EMI calculator?

Using an EMI calculator is very easy. You need not have any technical expertise or experience for it. Today, as most of the reputed lending organisations in India offer EMI calculators on their website, you can visit any lender’s website of your choice and follow the below steps

  • Most of the calculators have fields where you can manually enter the values. In some cases, the calculator may have a slider where you can slide it on the appropriate value.
  • If the calculator has a blank field, enter the principal amount, loan tenure, and interest rate. If the calculator has a slider, slide to appropriate values.
  • Next, click on the calculate or compute button and the tool will immediately show the exact EMI payable.
  • You can reset the calculator and change the values to know the EMI if you change the duration or the amount.

You can calculate multiple times and try different premutation and combinations so that the EMI is affordable.

Final Word

Now that you know how to use the EMI calculator, make sure to use the valuable tool and make an informed borrowing decision.