When applying for a home loan, the experts recommend all borrowers to use the EMI calculator. Read on to know its significance in financial planning for a loan and how it helps in repayment.
Availing a home loan is a big financial decision. And, since the debt duration ranges from 15 to 30 years, you must plan your finances well to repay the amount without default. Also, the EMI or equated monthly instalment must be affordable enough so that it does not affect your regular expenses.
The home loan EMI depends on several factors like the amount you wish to borrow, the loan tenure, the interest rate, etc. Hence, it is advisable to know the exact EMI payable to the lender beforehand so that you know how much the loan will cost you. Today, calculating the EMI is relatively easy; you can use the EMI calculator for a home loan. It is an online tool that is available on every lender’s website.
What is an EMI calculator for a home loan?
An EMI calculator or home loan calculator is an online tool that allows you to compute the EMI payable to the lender beforehand so that you can make an informed borrowing decision. The tool is easy to use, and you don’t need any technical knowledge or experience to compute the EMI.
Let us see how the EMI calculator can help you manage your finances better.
First and foremost, budgeting is an integral part of financial planning. And, when you know the exact home loan EMI amount, you can plan your monthly budget accordingly and set aside a portion of the income towards repayment. Suppose you avail of a home loan without knowing the EMI and find the amount unaffordable later. In such a situation, there is a high risk that you may default on the payment, which can cause major financial trouble. Thus, using the EMI calculator for a home loan in advance helps in avoiding such issues.
Another significant reason how the EMI calculator helps in financial planning for a home loan is that it allows you to compare and choose the right lender and get the best offer. For example, if you compare loan offers from three different lenders, by using this calculator, you can know the exact EMI you may have to pay based on the interest rate and other charges levied by them. Thus, you can make an informed decision in choosing the right lender that offers the loan at an affordable interest rate.
When you apply for a home loan, you must have a fixed budget in mind for the maximum amount you can afford to borrow. And, using an EMI calculator can help you in this endeavour. You can determine the amount you want to borrow based on the EMI and see if you can afford to pay the amount for a long period. For example, if you wish to avail of a home loan of 30 lakhs, for which the EMI comes to around 30K, then you can decide if you can pay the amount? or do you want to borrow less?
Last but not least, the home loan EMI calculator helps you choose the right tenure for a home loan. Remember, the loan duration has a direct impact on the EMI and affordability. Longer the loan tenure, the lower the EMI, and vice-versa. Based on your calculations, if you think the EMI will affect your other financial goals, you can increase the home loan tenure so that the EMI is more affordable.
Now that you know how the EMI calculator helps in financial planning, you should use it while applying for a home loan and be on top of your finances.