Calculating Home Loan EMI: Step by Step Guide

Home Loan

A home loan is a type of a secured loan that you can avail at an attractive interest rate with a prolonged tenor of up to 20 years. Besides, you can also avail top-up loans in case you choose to opt for a balance transfer. Also, balance transfer facilities help you reduce your interest rate by carrying your outstanding due to another lender offering advances at a lower interest rate.

With a lower interest rate and a prolonged tenor, you can make your EMIs affordable and reduce the burden of a loan on your pocket. With affordable EMIs, you can avoid payment defaults, hefty late payment fees and accumulation of debt. To estimate your EMIs before availing a credit, you can use an l by sharing details like 

  • Loan amount 
  • Loan tenor. 

While such EMIs present the ease of repayment despite availing high-value advances, there are two ways to calculate the EMIs – manual and using financial tools like calculators.  

Using Formula 

The formula that you can make use of to estimate your EMIs is – 

EMI = [P x R x (1+R) ^N]/ [(1+R) ^N-1]

Where P stands for the amount availed or the principal amount, 

R denotes the rate of interest, and 

N determines the tenor of your loan.

Understanding the formula for calculation of the home loan EMI is not enough for any potential borrower to confirm on the exact EMIs. It is also crucial that they follow the steps discussed underneath to work out the exact denomination and plan their finances accordingly. 

Of the most essential guidelines, customers should use a home loan EMI calculator to find the exact sum of money they have to pay their lender to clear their debt. Using the home loan calculator is relatively easy where customers need to put in relevant details. Furthermore, borrowers should keep in mind the underneath pointers as well.

Step 1: Understanding the requirement

Understanding the financial need is the first step towards deciding the EMI amount that will be applicable for a specific customer. Once a customer has his or her financial necessities laid out before them, they can decide upon the exact sum of money they must avail for financing. 

Along with the exact sum and home loan interest rates, customers can easily calculate their EMI. Planning adequately also allows borrowers to remove unnecessary expenses and therefore avail a low-value financing option.

Step 2: Gauging repayment capability

It consists of income as well as the debt to income ratio. 

  • On the one hand, borrowers need to lay out detailed monthly living expenses. 
  • Additionally, they should also factor in the various financial liabilities they have in credit repayment. 


Step 3: Check tenor options

The different tenor options offered by financial institutions usually go up to 20 years. In case an individual chooses the longer tenor duration, the EMI sums are less since the overall repayment is stretched over more months. 

Vitally, customers can easily avail for home loans once they have decided on their loan amount and worked out their repayment. They should also check the home loan eligibility details along with document requirements before beginning with the application. 

Also Read: All About Housing Loan: EMI Calculator & Eligibility Criteria

In addition to the above, several factors such as financial income, age, etc. come into play as well. Repaying the EMIs on time is an absolute must. Vitally, maintaining a timely repayment schedule enhances the CIBIL score over time. 

Of the other crucial factors, credit scores can determine your home loan EMIs since it decides the rate of interest that is applicable for a specific customer. 

Hence, before calculating your EMIs take such factors into consideration along with the primary factors that are the loan amount, tenor and interest rate. 


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