Are EMI calculators for home loans really that important?
After years of preparations, Ravi finally decided to buy a house for which he took a home loan. Thing were going really well for him. He started paying the loan back in EMIs and he had moved into the house. He was happy and so was his family but pretty soon things started to go south. He realised that he was getting left with lesser amounts to spend every month. After the loan EMI and the bills were paid, there would be very little left for the household and personal expenses. In the end he was left unhappy with lots of tensions on his head about how he was going to carry on with the rising cost of living.
The mistake he had made was that when he applied for the loan, his research was limited to which bank was offering the best interest rates and loan tenures. He neglected to use EMI Calculator for home loans to figure out exactly what he had to pay every month and that cost him dearly.
How EMI calculators work
To be able to use an EMI calculator you need just 3 pieces of information. The amount you want to borrow, the duration of the loan and the interest rate you will be charged. Once you have this information, you can enter it in the calculator and it will tell you the exact EMI in seconds.
The formula that is used to calculate EMI’s is:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Where
“P” is the amount that you want to borrow.
“R” is the interest rate per month calculated using the formula (Annual interest/(12X100))
“N” is the duration, in months, for which you want to take the loan.
This formula can be used to calculate EMIs manually also but that process might not be as efficient or accurate as the calculator.
Why use an EMI calculator
You may be wondering why a simple tool like the EMI calculator for home loans is given so much importance. The answer to your question is:
The EMI calculator can tell you what your EMI will be even before you approach a bank. That means you have the opportunity to know how much of your monthly income will disappear in the EMI.
These calculators are very accurate and can eliminate the possibility of errors in calculations. This means that as long as you enter the right numbers you will always get an accurate EMI.
If you were to use a pen and a paper to sit and calculate the EMI yourself, it will take you hours to come to a conclusion about the right EMI. With this calculator, the same will be done and over with in just a few minutes.
On the same theme, if you wanted to compare the EMI for loans from two different banks, the manual method would take forever to get you a result but an EMI calculator will do it for you in minutes which means that you can compare offers from different banks quickly and efficiently.
The calculator can save you money too. If you know how much needs to be paid every month then you will be able to arrange your finances to suit that EMI and won’t get any nasty surprises when the repayment starts.
In the case of Ravi, had he bothered to figure out exactly what his monthly payments would be, and then arranged his finances around that, there would never have been a situation where he would have been struggling to keep paying for the house. The fact of the matter is that this could happen to any one of us and that is exactly why Loan EMI calculators should be an important part of your research before you take a home loan.
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