# This is how an Emi home loan calculator works

A home loan is a valuable financial factor in a person’s life that keeps the borrower in debt until the principal loan amount and interest are paid in full. Since home loans are one of the most important loans, one should consider their finances and affordability before taking them out.

Researching interest rates, calculating the principal amount and EMI payments are the first things to do. So, to understand the nature of EMIs, banks provide a free online tool, known as the EMI Calculator for Home Loans. This calculator helps you determine your EMI amount for the desired amount at the specified interest rate over the life of the loan. The EMI calculator has many time-saving advantages, but very few know how it works. Here’s everything you need to know about EMI calculators for home loans.

What is a Home Loan EMI Calculator?

An EMI Calculator is a free online tool that helps borrowers calculate the EMI amount payable against the home loan. There are three basic components of the Home Loan EMI Calculator that the borrower must feed for the calculations. These are:

• The principal amount (desired amount of the loan).
• The duration of the loan (in months or years).
• How does the EMI home loan calculator work?

An online EMI calculator uses a mathematical formula to calculate the monthly payment (EMI) of your home loan based on the given inputs.

The mathematical formula is EMI = P x I x (1+I) ^T]/

Here,

‘P’ is the principal amount of the loan

I” is the monthly interest rate

‘T’ is the number of months or the duration of the loan in months

The monthly interest rate is calculated by dividing the annual interest rate by 12 multiplied by 100.

To better understand, here is an example. If a borrower takes out a home loan of Rs 10,000,000 at an annual interest rate of 7.2% for a term of 10 years (120 months), his monthly EMI will be calculated as follows:

EMI = Rs 10,00,000 * 0.006 * (1 + 0.006)120 / ((1 + 0.006)120 – 1) = Rs 11,714.

Therefore, the total amount payable will be Rs 11,714 * 120 = Rs 14,05,680

This means that for a principal loan amount of Rs 10,00,000, the interest amount will be Rs 4,05,680.

So, calculating the EMI manually using the formula can be tedious, but it becomes easier with a home loan EMI calculator.

(Edited by : Sudarsanan Mani)

First post: STI