How to Calculate EMI using Home Loan EMI Calculator in India

Today, many banks, HFCs (housing finance companies) and NBFC (non-banking financial companies) in India offer a variety of home loan schemes to suit the different needs of the borrowers. If you aspire to buy a home, you can easily get a home loan from any lender of your choice, provided you meet their eligibility requirements. 

While getting a home loan is easy, before you initiate the application process, you must understand the most significant aspect of the loan, i.e., the EMI or Equated Monthly Instalment. It is the amount or rather a periodic instalment you pay the lender on a monthly basis

EMI is a pre-decided amount and it is deducted every month from your chosen bank account. Usually, the EMI is deducted on a fixed date every month until the end of the loan tenure or till you repay the full amount. As a smart home loan buyer, it is critical that you know the home loan EMI beforehand so that you can take an informed borrowing decision. 

But how do you calculate the EMI? Using a home loan EMI calculator can be of great help in this regard. 

 

What is a home loan EMI calculator?

A home loan EMI calculator is an online tool that lets you compute the exact EMI applicable based on a few inputs like the loan amount, loan duration and interest levied by the lender. The tool is easy to use, and anyone can use it to do the EMI calculation without any prior knowledge or technical expertise. 

Almost all the lenders in India offer this tool on their website and even encourage the potential borrowers to use it. The tool has a simple and self-explanatory interface. You only have to enter the details in appropriate sections like loan duration, tenure, and interest rate and click the calculate button and the tool will show the results within a few seconds. 

 

Benefits of using a home loan EMI calculator?    

1. Firstly, using the home loan EMI calculator allows you to avoid doing complex EMI calculations manually, and it gives you accurate results. Knowing the exact EMI payable beforehand can help you plan your finances better and have a repayment plan. 

2. Since the EMI calculator is an online tool, you can access it from anywhere and anytime you want. Also, using this tool involves zero charges, which means you can use it multiple times and try different combinations of inputs until you arrive at a figure where the EMI is affordable. 

3. Using the home loan EMI calculator, you can choose the right lender with the best offer. You can compare the offers and check the EMI payable based on the interest rate and other charges levied by the lender before making the final decision. 

4. The home loan EMI calculator allows you to know the break-up of the different home loan charges levied by the lender like the interest, processing fees, documents verification charges, etc. This will help you know the overall loan cost and plan your finances accordingly. 

 

How do you calculate EMI using the Home Loan EMI Calculator?

As mentioned earlier, calculating the home loan EMI using an EMI calculator is easy. You just have to enter the values in the appropriate sections. All home loan calculators use the following formula to compute the EMI

 

E = P x R x (1+r)^n/((1+r)^N – 1

 

In the above formula, 

E = EMI or equated monthly instalments

P = Principal amount or the amount you wish to borrow. The lower the amount you borrow, the lower will be the EMI payable and vice versa.

R = The interest rate levied by the lender. The interest rate may vary from one lender to another. It has a direct impact on the EMI; the higher the interest rate, the higher the EMI.

N = The loan tenure or the duration for which you want to borrow. The longer the tenure, the lower the EMI. However, in a long-term loan, the overall interest you pay is high. 

 

Understanding the home loan EMI calculation with an example. 

Let’s assume Mrs. Shikha Pandey takes out a home loan of Rs. 10 Lakh to purchase a home. The lender offers the loan at an annual interest rate of 7.2%, and she chooses a loan duration of 10 years. 

So, as per the above formula, the monthly loan repayment amount or the EMI will be –

E = P x R x (1+r)^n/((1+r)^N – 1

Here N (duration) is 10 years = 10x12 = 120 months  

R (annual interest rate) is 7.2% = 7.2/12/100 = 0.006% 

EMI = 10,00,000 * 0.006 8 (1+0.006)120 / ((1+0.006)120-1) = 11,714

So, if Mrs Pandey’s loan application is sanctioned, she must have to pay an EMI of Rs. 11,714 every month for 10 years or until she pays the full loan amount. 

 

Conclusion

Before you apply for a home loan, it is paramount that you calculate the EMI amount so that you are certain the amount is affordable and you don’t face any financial burden during the repayment years. Do your due diligence and make smart borrowing decisions.