Plan for your Home Loan using an EMI Calculator - Loan Trivia

## Tuesday 5 June 2018

An individual faces the choice of investing in a home (if he/she does not already own one) or choosing to stay in a rented home throughout his/her life. If the finances permit and provided the liabilities are not too high, investing in a residential property is a good idea in most cases. Here, a majority of the people face a lack of financial resources, and to resolve the same, banks, Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs) offer a variety of Home Loan schemes. So, once an individual has decided to invest in a home of his/her own, the right property in a desired location should be chosen based on the budget set aside. Accordingly, the down payment for the home needs to be arranged for which ideally amounts to at least 20% of the property’s value. The remaining amount is financed through a Home Loan.

Repaying a Home Loan involves paying EMIs every month on a set date, as per the billing cycle following disbursal. This EMI, acronym for Equated Monthly Instalment comprises of both the amount borrowed and the interest charged by the bank, HFC or NBFC chosen. The rate of interest, tenure chosen and the EMI determine the affordability of the Home Loan.

The following mathematical formula is used to calculate the EMI for a Home Loan:

EMI = [P x R x (1+R)^N]
[(1+R)^N-1]
Where:
P= Principal Borrowed
R = Interest Rate per Month, and
N = Number of Installments in Months

Borrowers can determine the affordability of the available Home Loan schemes before actually applying by using this formula. This could either be done manually, or by using an Excel Spreadsheet.

Alternatively, borrowers can surpass complicated calculations and use a Housing Loan EMI calculator. They are easy to use and free online tools that calculate the EMI and provide details of the repayment schedule with a few clicks of the mouse button.