A borrower repays home loan amount that he or she has availed from a lender via equated monthly installments or EMI for a fixed repayment period. It consists of two components – principal and interest. The formula that is used by your home loan lender to calculate this EMI is as follows –
EMI = [P x R x (1+R) ^n] / [(1+R) ^ n-1]
Here, P = Principal amount
R = Home loan interest as specified by your lending institution
n = Number of monthly installments to be made throughout your repayment period
Additionally, individuals can also take help of online tools like a housing loan interest calculator
to compute the EMI amount by themselves before applying for a loan. Go through the steps below to learn how to use the calculator –
Visit your lending institution’s official website
Go to the home loan section and click on loan EMI calculator.
In this calculator, enter a loan amount you want to avail, select your repayment period and home loan interest rate.
After entering the above details, the calculator will display the EMI, total amount and the total interest payable.
There are several advantages of using a home loan EMI calculator. Applicants can compare interest rates offered by various lenders. They can also adjust the loan amount and the repayment period to gain an idea about the monthly payment they have to make as EMI. It will also enable them to understand how the EMI will affect their budget and streamline it accordingly to avoid debt.