An EMI calculator or Equated monthly installment calculator is a tool that calculates monthly Emi payments within a few seconds. To use the home loan calculator, all you need to do is enter the variables, principal amount, interest rate, tenure etc. in the calculator and it will give you the EMI amount instantly.
Formulae for calculating the EMI:
EMI= [ P x R x ( 1+ R)”T]/[(1+R” (T-1)]
The use of variables is as follows:
EMI= Equated monthly installments.
P- Principal amount of loan.
R- Rate of interest on loan.
T- Tenure of loan, or the no of installments to be paid [monthly]
The use of the EMI calculator is an important tool to calculate an EMI as it is quick and easy to calculate as well as it is very accurate.
On an EMI calculator:
If the customer is taking a loan of amount worth Rs.50 lacks for 20 years at the rate of 6.80% per annum.
Answer: The monthly EMI which the customer will have to pay is Rs. 38,167 per month.
There are two types of interest rates being applicable while opting for EMI’s:
[1] Fixed interest rates.
[2] Floating interest rates.
Explanation:
Fixed interest rates are the ones wherein once the interest rates are fixed the applicant will have to pay the fixed same interest rates until the end of the loan tenure. In fixed interest rates the higher the duration of repayment of the loan, the higher is the total repayment of the amount that needs to be done by the applicant while opting for a longer duration of the loan can lead to a lowering of monthly EMI’s.
While as floating interest rates are the ones wherein the applicant is liable to pay installments with interest rates on a floating basis depending on the current interest rate going on. While opting for floating interest rates the customer can benefit in terms of interest re-payment if the interest rates get reduced. While as sometimes if the floating interest rates increase then the customer is liable to pay higher interest on the loan taken. As per the current market trends, the interest rates are on a continuous declining trend as the Reserve bank of India is reducing the repo rates thus resulting in a reduction of interest rates.
Home loan EMI calculation example:
Mr.XYZ borrowed a home loan of Rs.3,50,000 (Principal amount of P) from a particular bank. The rate of interest is associated with 8.65% per annum. The tenure is 360 months i.e: 30 years.
P= 3,50,000
Interest rate: 8.65%
N= 360 months.
Monthly EMI= Rs.27,285
EMI paid for the year= Rs.27,285 * 12= 3,27,419.
Benefits of Home loan Emi calculator:
Easy process:
The person has to enter only the details of the amount of loan taken, the interest rate applicable as well as the duration of the loan. Within the few seconds, the monthly EMI gets calculated. Also there are no chances of error in case of calculation through EMI calculator.
Breakup of the finance charges:
This tool helps us know the financial charges such as total interest payable and processing value based on the EMI. Since the bank and financial institutions present them as the percentage of the loan amount, knowing the actual value can help understand the true cost of the loan.
Comparing loan offers:
The applicant can use the loan calculator from various banks. The results will show you the total cost of each loan at the earliest. Otherwise, you can pay a more comfortable EMI and extend your loan period.
Choosing the right tenure:
Knowing the right EMI can help choose the appropriate tenure of the loan. If an individual is able to pay higher EMI then they can opt for shorter duration loans, while for lower monthly Emi there could be higher interest rates applicable.
Helps in validating information:
If the applicant negotiates with the bank, you can verify the repayment schedule. The lenders may also include some other miscellaneous charges and fees in EMI calculation.
Helps with loan management:
Sometimes while paying your EMI’s applicant may have extra funds for pre-payments. If the applicant revisits the financials help the loan term-end.
Thus we conclude that the EMI calculator helps the applicant find the exact installment amount to be paid on a monthly basis so as to check the affordability of EMI. Also, EMI calculator helps the applicant decide whether he/she will be able to afford the EMI applicable on a monthly basis or not.
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