Technological development has made applying for loans quick and simple. Digitalization enables you to determine your loan eligibility and stay updated with all the loan-related information. Furthermore, online calculators help you to calculate the estimated Equated Monthly Installment (EMI) you will have to pay during the loan tenure.
Understanding the loan EMI
The EMI is the monthly amount paid towards the repayment of your loan amount. To calculate the EMI, you will need to input the loan amount, tenure, and rate of interest. The monthly installment primarily comprises the interest and principal repayment. In the initial loan duration, a higher component of the EMI is paid towards the interest. Over the years, the EMI component towards principal repayment increases.
Importance of calculating the EMI
When you apply for a home loan, the lender considers several factors like your repayment capability, age, credit score, income and other related factors before giving an approval. Using an online calculator prior to applying for a loan is important as it will help you know the estimated monthly payout. Knowing this amount beforehand will help you determine the EMI amount you may comfortably pay each month without facing financial difficulties.
Here are four parameters you need to input while using an online EMI calculator.
- Loan tenure
You may choose from different loan tenures, such as five, ten, or twenty years. This is the time during which you will have to pay the EMI.
Some calculators provide you with an option to determine your EMI by considering prepayment or additional payments during the loan tenure.
- Interest rate
You may choose from the range of interest rates given online. Most lenders charge an interest rate ranging between 8.75% and 12.75% per annum.
- Processing charges
Most financial institutions charge a processing fee for the loan approval. This fee increases the total cost of borrowing and helps determine your EMI.
Here are four benefits of using an online EMI calculator.
Using an online home loan calculator is simple and user-friendly. It does not require having in-depth technological knowledge.
- Cost efficient
One of the biggest benefits of online EMI calculators is that these are free for use. You do not need to pay any fee for using these calculators. This is a cost-efficient way to determine your monthly payment before applying for the loan.
You may input various combinations for the rate of interest, loan tenure, and loan amount to determine the EMI under different scenarios. Using this calculator will help you compare different combinations to make an informed decision.
The online EMI calculators are not only simple to use but also complete the calculation within a short time. This means you may make your analysis quickly to reach an accurate decision.
You must use an EMI calculator to determine your approximate monthly payments before applying for a loan. Furthermore, you may compare the EMIs offered by different lenders to make an accurate decision.