Why and how you could get an EMI calculator for home loans

by Litty Jose Finance Analyst

Home loan tax benefits is a topic that interests all but, can be quite a daunting thing to understand. For someone who is not familiar with financial terms and regulations, the topic of house loan and tax benefits can truly send them over the edge. But in India, property is said to be the best investment and to own property you need to understand how house loans work.

Home loan tax benefits are closely linked to home loan EMIs. Something a loan taker should know is how to calculate his or her own EMIs so that he can make an informed decision as to what rate of interest is most suitable for them.

Getting a home loan EMI calculator is easy. You can find it on any loan site on the internet, but to understand it better you must know how to do it yourself.

So here’s a little help, we’re going to tell you how to calculate EMI on your home loan, so that you can rest assured that you’re not being cheated by your bank. For this purpose, let’s take the example of Mr.X, who took a home loan for Rs. 5 lacs for a period of ten years, at the rate of 10.5%. He pays a monthly EMI of Rs 6,747. The bank calculates this EMI for him, and he feels he’s cheated. Here is an easy way for Mr.X to calculate his EMI.

The easiest way is to use a mathematical formula that has been derived to calculate EMIs. The formula reads, EMI = [P x R x (1+R)^N]/[(1+R)^N-1]. The P stands for the principal amount of your loan, R is the interest rate per month and N is the number of monthly instalments to be paid.

Another way to calculate home loan EMI is with the help of Microsoft Excel Sheets. The formula used here is called the PMT. For this formula you need three variables, the rate of interest, the number of periods (nper) and the value of the loan. This formula is used universally for this purpose and when in doubt you can use it to calculate your own EMI. There isn’t any scope for error since it’s all done by a computer.

Having an EMI calculator for home loans is always a good idea because missing EMIs or not being able to pay them in the long run can land you in the defaulters list and ruin your credit score. Hence, it’s always a good idea to know what you’re getting into.