The Equated Monthly Instalments (EMIs) of home loans involve substantial outgo in the repayment of the loan corpus. According to a 2017 report, around 1% of home loan consumers fail to repay the said debt on time.
Failure to calculate the installments beforehand can result in an increased burden during the repayment tenor. The home EMI calculator helps in understanding the quantum of EMIs for the loan, ensuring an informed decision accordingly.
How to manage your home loan installments?
An EMI calculation helps in understanding the amount of money that needs to be allocated for payment of your installments. Consider these following factors while planning your home loan EMI repayment to ensure that it does not strain your finances excessively.
- Net income
The amount of money that a borrower earns every month is an integral aspect that they must consider. Individuals with higher earnings can easily repay even substantial loans within the allocated time. On the other hand, those with minimal income need to lower their loan quantum or increase their repayment tenor to ensure hassle-free repayment.
Keep in mind that financial institutions only extend home loans to individuals who meet the basic income eligibility. Otherwise, availing such a loan may become difficult or, in some cases, impossible.
- Keeping Expenditure in Check
In using the housing loan EMI calculator, future expenses will also have to be determined along with current expenditure. Future expenses may include medical costs, education expenses, family and personal expenses, among others. If these prospective expenses are not taken into consideration, it would eventually put an enormous amount of strain on your finances in case of a high monthly installment outgo.
- Living standard
While determining the home loan EMI, the borrower should also factor in the current standard of living. For instance, utility bills, rent, and food expenses can account for a considerable chunk of an individual’s monthly earnings.
If a borrower is looking for ways to pay off their home loan faster or more effectively, lowering such expenses can greatly help in their pursuit.
- Tenor of loan
If a borrower can afford to part with a substantial part of the salary for paying EMI, then choosing a shorter tenor is the best option. It will ensure that the home loan is liquidated faster.
Alternatively, if you do not wish to exert your finances further, opt for 15-20 years’ tenure and make steady payments.
- Rate of interest
Home loan interest rates may be fixed as well as floating. While the fixed interest rates are higher, the latter fluctuates with respect to prevailing market conditions. Depending on your financial health, decide whether it will be convenient to pay a higher EMI or bear the risk of floating rates.
Your home loan eligibility factors, including income and CIBIL score, can also determine the interest that your lender charges for the said credit.
The minimum CIBIL score for home loans is not the same as that on unsecured loans although lenders do prefer applicants with a CIBIL score around or above 750.
Before availing such a loan, make sure you use a housing loan EMI calculator. Doing so should help you pick the perfect principal sum while combining it with the most comfortable repayment tenor. Moreover, it will provide an estimation of the monthly installments, and decide on the loan amount as per repayment capacity.
For avoiding undue strain on your finances, keep a close watch on the installments for the same. Determine whether you have the necessary funds remaining after meeting your monthly liabilities. The housing loan EMI calculator should be used prior to availing the loan so that the installments do not dent your planned expenses.