Home loans are low-interest rate loans that make the process of purchasing one’s dream home easy and reachable. However, the long tenor involved makes financial planning significant.
A home loan interest calculator is an online tool that allows home loan borrowers to calculate their loan EMIs beforehand and plan repayment strategies accordingly. The output page of this calculator displays the total interest that a borrower will have to pay on their loan as well as the final cost of borrowing the loan if the user pays their EMIs consistently, without making prepayments or increasing the value of one’s EMIs.
Whether you are planning to apply for a loan or are already repaying one, a home loan interest calculator can help you make the right decisions regarding your home loan. More importantly, it can prove especially helpful with monthly budgeting and financial planning.
How Does the Home Loan Interest Calculator Work?
Home loan interest is calculated using the following formula:
Home Loan Interest = (Principal x Rate of Interest x Time)/100
The formula makes it quite apparent that calculating home loan interest manually is no easy task. Manual calculations may be difficult to execute and may cause some errors in planning for home loans.
Home loan interest calculators use the formula shown above to calculate the interest on one’s home loan. Other than the total interest outgo, these calculators also calculate the EMI that one will have to pay on their loan.
The home loan interest calculator works on three details: the loan applicant’s desired loan amount, their desired loan tenor and the best or the lowest home loan interest rate they are being offered.
Once a user enters these three details and clicks on calculate, the calculator displays the EMI that they will have to pay for their desired combination of loan value and loan tenor, the total interest they will have to pay their lender and the cost of borrowing the loan. Apart from this, some home loan interest calculators also give borrowers an EMI breakup highlighting each month’s EMI’s principal and interest component.
While using the home loan interest calculator, users must keep a few things in mind. Under the home loan amount, users have to enter the home loan amount they wish to borrow and are eligible for. Understanding home loan eligibility is important and applying for a loan amount higher than one is eligible for can lead to loan application rejection. Second, they should decide on their home loan tenor smartly.
While a long home loan tenor will make repayment entirely stress-free, it will also increase your home loan interest payout. On the contrary, a short tenor will help you save interest and become debt-free quickly. However, it may make loan repayment challenging.
Benefits of a Home Loan Interest Calculator
Let us now walk the readers through the benefits of a home loan interest calculator.
- The home loan interest calculator lets home loan borrowers ascertain the feasibility of the loan. If the EMI and the interest payout seem too high, the calculator user can keep trying different combinations of loan tenor and loan value until they arrive at a combination that delivers affordable EMIs and as low an interest payout as possible.
- By helping you decide the right loan amount and loan tenor for you, a home loan interest calculator saves you from late fees and penalties and in the worst-case scenario, the chances of a loan default.
- If becoming debt-free is high on your list of goals, then a home loan interest calculator can help you greatly. These calculators give users their amortization schedule and by looking at this schedule, users can easily figure out the ideal time for loan repayment so that they save maximum interest.
- The home loan interest calculator is free and easy to use. More importantly, it is quick and accurate and helps users save both time and effort. Users can use this time and effort to find the right lender for them and negotiate with them for the best home loan terms and conditions.
- Lastly, home loan borrowers can also use a home loan interest calculator to compare different offers and choose the best one for them.
Final Words
A home loan interest calculator is a highly beneficial tool that all home loan borrowers should make a part of home loan repayment planning and their overall home loan journey.
