Getting a home loan in the contemporary economic setting is easy if you fit the basic eligibility criteria set by the lending party. Reputed home loan providers like PNB Housing Finance Ltd can easily finance the purchase of your next property at a very reasonable interest rate.
However, repaying the home loan throughout its maturity can be challenging if you haven’t planned your expenses well. The PNB Housing home loan calculator is a great financial tool to help you compute your EMIs on these loans.
Deep dive into EMIs
Equate Monthly Instalments (EMIs) is a fixed payment amount deducted from a borrower’s account every month for loan repayment. It is paid at a pre-specified data during every calendar month.
The EMI amount is determined by three important metrics: the principal amount, rate of interest, and total loan tenure. A change in any of these components can change the EMI amount. All monthly installments include some fraction of both principal and the interest amount.
While opting for a home loan, one should always look for the lowest home loan interest rate. This will drastically reduce your EMIs and the total due amount.
Understanding EMI calculation
Most financial institutions have a digital presence in today’s era, and one can easily use an EMI calculator to find out the exact amount. All you have to do is enter the principal amount, interest rate, and the duration of the loan.
The digital home loan calculator by PNB housing also makes it easier to compare EMIs for different combinations of the principal amount, interest rate, and loan tenure. At the core of all digital EMI calculators lies an important mathematical formula for EMI computation:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
In the above mathematical formula for calculating EMI, P represents the principal amount, R represents the monthly loan interest rate, and N denotes the total loan tenure in months. Entering the exact figures for these metrics in this formula will help compute your EMIs easily.
If you want to avoid errors and are looking for an accurate measure, it is best to use the home loan calculator by PNB Housing.
Let’s look at an example to understand better:
Suppose that your total home loan amount is INR 25,00,000, the interest offered by your lender is 7.5 percent and the loan tenure is 10 years (120 months). Now putting these figures in the above EMI calculation formula will give you the EMI amount, which is equal to INR 29,675 in this case. The total interest payment amounts to INR 10,61, 053 and the total due amount is equal to INR 35,61,053.
Choosing the right EMI amount
Repaying a home loan is a long-term financial commitment, and one needs to be prepared for the same. Defaulting on your monthly installments can increase your financial burdens and also reflects poorly on your credit history.
The very first thing that you need to do is evaluate your current financial situation. You will need to look at your previous income and expenses reports. Most financial institutions allow EMIs up to 40% of your in-hand salary. However, if the existing debt to income ratio is higher, one should take a lower percentage.
Factoring in the present and future liabilities is a great way to assess your finances. If you can’t lower the loan amount, you should increase the loan tenure to lower the EMIs. One must choose an EMI amount as per their repaying capacity.
The home loan calculator will give you an idea of the amount of home loan you would be eligible for and can comfortably repay. It helps you plan your cashflows and gives a clear idea of repayment and interest details, ensuring that you don’t bite off more than you can chew.
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Conclusion
Repaying your home loan throughout its maturity can be challenging if you haven’t planned your expenses well. Knowing the exact monthly installment amount you will be repaying puts you in a better spot to manage your finances. It greatly reduces the risk of default if you choose an EMI as per the repayment capacity.
