How Does a Home Loan EMI Calculator Work?

How Does a Home Loan EMI Calculator Work?


The EMI or Equated Monthly Instalment is one of the most important things that the loan applicants consider for making their borrowing decision. But how can you calculate the EMI? You can use the home loan EMI calculator. Read on to know more about the tool.

A home loan EMI calculator is an online tool that allows loan applicants to compute their EMI. Repayment of the home loan along with the interest amount within the prescribed duration, requires careful financial planning. You must assess your repayment capacity before deciding the loan amount; you must apply for a loan that you can afford to repay quickly without compensating on your regular expenses. This is where an EMI calculator can be useful.

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Today, you can easily calculate the EMI amount online; most lenders have this tool on their website. You need not have any technical knowledge to use this tool; even first-time buyers can use it. The tool requires you to provide necessary details about the loan, and it will calculate the exact EMI you must repay within a few seconds.

Before we discuss how this calculator works and its benefits, let us first understand what is home loan EMI.

What is home loan EMI?

An EMI is a loan repayment method, which includes both the principal amount and the interest is paid to the lender in equal instalments throughout the loan tenure. Calculating the EMI in advance can help you know the exact amount you must keep aside from your income towards the repayment of the loan. Thus, you can also manage your finances better.

During the initial years of the repayment, a significant portion of the EMI amount is devoted to the interest repayment. But, as you continue to repay the amount consistently, over a period, a more significant portion of the EMI goes towards the principal amount repayment.

The formula for calculating EMI

You can calculate the EMI manually with the following formula

EMI = [P x R x (1+R)^N]/[(1+R)^N-1]

In the above formula P, R, and N are variables, which means the value of the EMI will change if you change the value of any of the three variables.

  • P is the principal amount or the amount sanctioned to you by the lender
  • R is the interest rate
  • N is the loan tenure

How does the home loan EMI calculator work?

A home loan calculator is an excellent tool that helps you precisely calculate the EMI payable to the lender every month. The working of the tool is simple. You must enter the following details

  • Loan amount that you wish to borrow
  • The duration of the loan
  • The interest rate charged by the lender

Based on the inputs you provide, the calculator will automatically compute the EMI amount. You can change the data multiple times to get the desired EMI amount that you think is affordable for you to repay every month.

Benefits of using Home Loan EMI Calculator

Buying a home is a significant investment, and it is paramount that you do it right. By using the EMI calculator to compute your EMI beforehand, you can plan your finances accordingly and not let EMI become a financial burden. EMI calculator offers several benefits:

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Instant results

EMI calculator helps you get rid of the tedious arithmetic calculation to determine your EMI amount. The tool gives you immediate results with just click of a button.

Easy to use

The online home loan calculator is designed in a way that anyone can use it without any training. The tool is very self-explanatory; you must enter a few details, and the tool will do the calculation and provide you with precise results.

Free to use

The tool is available 24 x 7. You can use the calculator any number of times without any cost.

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