A quick scan of the Indian credit industry suggests that home loans are the most popular and flexible financing option. Almost any Indian citizen can afford a home loan on easy terms and repay conveniently for 30 years. However, since the repayment term of a home loan is much higher than other loans, proper planning is crucial to avoid falling into a debt trap.
A home loan EMI calculator is a free online tool that enables you to calculate your home loan liability and make sensible decisions. You can visit any lender’s website and open a home loan EMI calculator to check the monthly amount you have to pay.
This article explains why you must use an EMI calculator before applying for a home loan in 2022. But, before understanding the benefits of an EMI calculator, let’s learn about the mechanism.
How to Use the Home Loan EMI Calculator?
You can use a home loan EMI calculator to get accurate estimates about your home loan in four simple steps:
- Open an EMI Calculator – Visit a lender’s website and look for the home loan EMI calculator. EMI calculators are generally free, meaning you don’t have to pay any fee to use them. Besides EMI calculators, you can also find free tools like home loan affordability calculator, stamp duty calculator, eligibility calculator, tax benefits calculator, etc.
- Enter the Principal – The principal is the loan amount you want to get from your lender. The loan amount can be up to 90% of the market value of the property you wish to purchase or construct. But lenders evaluate your net income before determining the principal you are eligible for.
- Enter the Interest Rate – The home loan interest rate depends on the MCLR (Marginal Cost of Lending Rate) set by the RBI (Reserve Bank of India). If the MCLR changes, so does the interest rate. Check the latest interest rate before entering it here.
- Enter the Tenure – Home loan tenure refers to the maximum term you need to repay your loan. Generally, you may select a tenure between five and 30 years.
Now that you know the primary mechanism of a home loan EMI calculator, let’s discover the top reasons to use a calculator before applying for a home loan.
Top Reasons Why Using a Home Loan EMI Calculator is a Must in 2022
Simple and Accurate
As already mentioned, the home loan EMI calculator is a simple tool that provides accurate figures. However, without it, it becomes challenging to calculate the EMI. As a fact, the mathematical formula used to calculate home loan EMI is not easy.
And even a minor mistake in using the formula can display erroneous results. So, a home loan calculator shows exact EMI figures in the simplest possible way.
Appropriate Tenure Selection
A home loan EMI calculator enables you to select the loan term appropriately. For instance, if you keep the tenure at less than 15 years, your home loan EMI will shoot up.
But, if you want to pay more affordable EMIs, increase the term on the calculator to check the adjusted EMI. So, an EMI calculator provides excellent flexibility in changing the figures to arrive at an appropriate tenure for your home loan.
Professional Loan Management
Besides allowing you to pick the best tenure, a home loan EMI calculator facilitates excellent loan management. You can use it to plan your repayments before applying for the loan.
Also, you can use the calculator to check how prepayments reduce your home loan liability. It is wise to note that lenders do not levy any fee or penalty on floating-rate home loan prepayments. So, you may use the EMI calculator to avoid a debt trap.
Perhaps the best feature of a home loan EMI calculator is that it enables you to compare lenders and loans. Since EMI calculators are free, you can change the input figures multiple times to analyse which lender offers the best deal on home loans. So, you can use the calculator to find the best lender and save money.
A home loan EMI calculator is one of the many free tools Indian lenders provide to enhance customers’ knowledge of home loans. Checking an EMI calculator is a must to stay fully prepared to repay the loan by avoiding a debt trap.