An EMI calculator is your best friend when planning your Home Loan repayment. This tool removes the complexity of Loan calculations, clarifying your Equated Monthly Instalments and helping you make informed financial decisions. But what are the components of a Home Loan EMI calculator? Let us understand them in detail:
Interest rates
The interest rate is the cost of borrowing money from the bank, denoted as a percentage. It is applied to the Loan amount to calculate the interest component of your EMI. You need to input the interest rate into the calculator to compute your monthly instalment accurately.
Loan tenures
This is the duration of your Loan repayment period, typically measured in years. The longer the tenure, the lower your EMI, but the higher the total interest payable. Conversely, a shorter tenure results in higher EMIs but lower interest costs. In the EMI calculator, you specify the Loan tenure to calculate your monthly instalment.
Loan amount
The amount denotes the total amount you borrow from the bank to purchase your home. It is the principal amount on which the interest is calculated. In the Home Loan EMI calculator, you input the Loan amount to determine your monthly instalment.
Equated Monthly Instalments
The EMI is the fixed monthly amount you pay the bank to repay your Home Loan. It includes both the principal repayment and the interest payment. The EMI calculator computes this amount based on the Loan amount, interest rates, and tenures you input.
Principal components
This portion of your Housing Loan EMI goes towards repaying the principal amount borrowed. With each EMI payment, the outstanding principal reduces, and consequently, the interest payable in subsequent instalments also decreases.
Interest component
The interest component of your EMI represents the cost of borrowing money from the bank. It is calculated based on the outstanding principal amount and the applicable interest rate. In the initial years of the Loan tenure, a major portion of your EMI goes towards paying off the interest.
Total interest payable
This is the total interest you need to pay over the entire Loan tenure. It is calculated by multiplying the total number of EMIs by the monthly interest amount and subtracting the Loan amount.
Conclusion
Understanding these Home Loan EMI calculator components empowers you to make the right decisions about your Loan repayment strategy. You can determine your monthly instalment by entering the amount, interest rate, and tenure. Furthermore, understanding these components will also help you visualise how much of your EMI goes towards repaying the principal and how much towards the interest.
With this knowledge, you can plan your finances better and stay on track to become a proud homeowner.