Purchasing a home loan for your dream house requires diligent planning – the whole process does not have to be difficult as long as you are efficient at paying your EMIs. Proper management of your home loan EMIs is essential to ensure that you do not end up disrupting the remaining portion of your finances over a high home loan interest rate. Read on to know some surefire ways to manage your home loan EMI efficiently.
6 Basic Rules to Manage Home Loan EMI Efficiently
Here is a complete guide on how to pay your Monthly Equated Installments (EMIs) without hassles.
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Work on EMI Budget
The first step towards managing home loan EMIs prudently is to devise a monthly budget and stick to it. This involves taking your monthly family income into account and calculating the total expenditures on essential items – ration, utility bills etc. Try to cut back on additional or luxury expenses. If your budget falls short, you may have to make some adjustments before finalizing the home loan EMI amount so that you are comfortable paying it off every month.
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Pay off Your Debts
Borrowing funds for things that do not improve your standard of living or financial health is an example of bad debt. For instance, using your credit card to purchase things that are of little or no importance, or are unnecessary keeping your budget in mind is useless. Therefore, you should prioritize eliminating such debts at the earliest. Once you clear your debts, you can utilize the saved money to repay the loan amount and perhaps save up more.
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Try to Make Larger Payments
Paying more than what’s require every month will shorten the repayment tenor and you will be able to pay off your monthly dues early. However, make sure you do not end up getting penalize for home loan foreclosure. This is more common in the case of floating home loan interest rates. You should get in touch with your lender regarding this before proceeding any further.
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Opt for Part Prepayments
Whenever you make some extra funds, say, a salary hike, profit on investment, or monetary gifts, consider using the extra money to make home loan part prepayments. This is a great way to manage your home loan EMIs and reduce the interest burden.
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Transferring Balance to a Lower Interest Rate
Home loan interest rates may vary so you need to be well-verse with the current rates. This is because switching to a new lender or transferring your existing home loan balance transfer may help you cut down on additional interest payments.
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Make Use of a Home Loan EMI Calculator
A home loan EMI calculator is a free, online tool that helps assess your current income to evaluate the monthly EMI amount towards your home loan repayment. With a housing loan calculator, you can chalk out a plan for how much to pay every month throughout the length of the loan tenor and adjust your budget accordingly.
What Is a Home Loan EMI Calculator?
An online home loan calculator is a unique device that is designe to help potential borrowers calculate home loan EMI towards the home loan taken. It provides instant results with 100% accuracy.
How to Calculate Home Loan EMI?
The online home loan calculator uses a mathematical formula to estimate your monthly EMIs based on some inputs. These are as follows –
P x R x (1+R)^N / [(1+R)^N-1]
Here, P = Principal amount
R = Home loan interest rate
N = Loan tenor (in months)
Now, for instance, if X avails a home loan of INR 40 lakh at an annual interest rate of 11% for a tenor of 10 years (120 months), then the payable EMI will be calculate as –
EMI = INR P x R x (1+R)^N / [(1+R)^N-1]
= INR 4000000 x 11 x (1 + 11) ^120 / [(1 + 11) ^120 – 1]
= INR 55,100
Thus, the total amount payable EMI will be INR 55,100 every month. The total interest amount will be INR 26,12,001.
Calculating the EMI manually would be a tedious task but with a home loan EMI calculator, it can be done easily.
How to Use a Home Loan EMI Calculator?
The steps to use a housing loan calculator are easy. All you have to do is –
- Access the online home loan calculator
- Enter the desired loan amount, the home loan interest rate chosen, and the loan tenor
- Check your monthly EMI amount along with the total payable interest and principal
Summary
If you are planning to avail yourself of a home loan, the first thing you must do is figure out the amount you can comfortably pay. Borrow what you will be able to easily pay without your EMIs become a burden for you. Be disciplin with your EMI payments — when it comes to efficient EMI management, one must be diligent and farsighted so as not to make mistakes. You must remember to pay off the monthly installments on time since any defaults may cost you a penalty and also adversely affect your credit score. If you tend to forget due dates, set up reminders of auto-payments. Lastly, use a home loan calculator to understand the loan amount you are eligible for and the EMIs you can easily afford to pay each month. A housing loan calculator provides you with a clear estimate of the monthly amount that needs to be paid towards the loan EMIs, thus helping you make an informed decision on budget planning, part prepayments etc. So, make it a part of your home loan application process and repayment journey.
