 # Step by Step Guide: How to Use a Home Loan EMI Calculator

A key part of home loan planning is to know your EMIs before you apply. There are several ways to go about this, and the simplest of them all is to use a home loan EMI calculator. Mumbai, First Published Apr 29, 2021, 5:25 PM IST

A key part of home loan planning is to know your EMIs before you apply. There are several ways to go about this, and the simplest of them all is to use a home loan EMI calculator. This freely accessible tool is available on almost every lender website and displays error-free results within seconds.

For a step-by-step guide on how to use a home loan EMI calculator, read on.

Steps to calculate EMIs using the home loan EMI calculator

Step 1: Enter the loan amount in the field marked ‘Loan Amount’

Step 2: Input the home loan interest rate in the field marked ‘Interest Rate’

Step 3: Choose the repayment timeline and input the value into the field marked ‘Tenor’

Step 4: Click the 'Calculate' button to get your results instantly

Following these steps is sure to simplify the entire process. However, knowing how to calculate your EMIs with a home loan EMI calculator has other benefits in addition to its convenience. These include:

● The option to compare offers and identify the best home loan available

● Invaluable insights into the cost of the loan

● Better planning and efficient loan repayment

● The selection of a loan amount that suits your finances

Do note, you only enjoy these benefits if you use a calculator that also displays the total interest payable, the amortisation schedule, and the total loan payable.

Now that you have more insight on how to use a home loan EMI calculator, read on to know how to calculate home loan EMIs manually without the EMI calculator.

Steps to calculate home loan EMI manually using the formula.

Use the below formula to calculate your home loan EMI manually.

EMI = [P*R*(1+R)^n]/[(1+R)^n-1]

Here, 'P' is the loan amount; 'R' is the home loan interest rate on a monthly basis and 'n' is the tenor, represented in months.

The value for P can be entered as-is. However, the values for 'R' and 'n' require additional calculation. Here is an example to show you how to get the value for 'R' if it is 7% and 'n' if it is 20 years.

R = [(annual rate /12)/100]
= (7/12)/100
= 0.5833/100
= 0.0058

‘n’= (Tenor in years x 12)
= (20*12)
= 240

Once you have these values, use the EMI formula. Obviously, this can be a tedious process, and a simpler alternative is to use Microsoft Excel. Read on to know more.

Steps to calculate EMIs using Microsoft Excel

Another option is to calculate your home loan EMI by applying the formula in Microsoft Excel. Use the function 'PMT' and not 'EMI' to ensure error-free calculation via this method.

The formula you need to use is: =PMT(RATE,NPER,PV,FV,TYPE)

In this equation, all the other terms aside from ‘PMT’ elements in this formula are variables and must be assigned numerical values. These correspond to the loan particulars, such as the rate of interest, tenor, and the principal amount. Here is a detailed breakdown for a better understanding.

RATE denotes the interest rate applicable to the loan. To get this value, divide the home loan interest rate by 12. For example, at a 7% annual interest, RATE would be 7%/12, or 0.0058.

NPER denotes the number of EMIs for any given tenor. You can derive the NPER value by multiplying the number of years by 12. For example, for a loan of 20 years, the NPER is 20*12.

PV denotes the principal loan amount, i.e. the amount you’re borrowing. FV denotes the future value or balance remainder after the last payment. You may omit it, and it will not affect the results.

TYPE denotes when the payment is due, and the values can be either 0 or 1. If payment is due at the end of the period, then TYPE=0; if the payment is due at the beginning of the month, TYPE=1.

To give you an idea of how it all works, take a look at this example. Consider a sanction of Rs 20 lakh with a 7% interest rate for a tenor of 240 months. In this case, the values of the excel formula should be: =PMT(0.0058, 240, 2000000, 0, 0)

With these values, the output will be 15,506, which is the EMI for these loan terms.

Knowing the different ways to calculate your EMIs is useful, but thanks to easy digital access, your best option is the home loan EMI calculator. It is fast, simple, and completely eliminates the chance of error. Moreover, some lenders even allow you to directly opt for a loan offer based on your calculation. For instance, you can avail of this benefit with the Bajaj Housing Finance Limited Home Loan.

Once you use the home loan EMI calculator by Bajaj Housing Finance, you can easily apply for a loan with a single click. This is one of the many convenience-first features you enjoy with this offering. If approved, you can avail of a sizable loan amount with a flexible tenor and other features, such as online loan management, which allow you to access your loan details and management prepayments from the comfort of your home. What's more, thanks to the simple eligibility criteria, you enjoy quick loan processing and minimal delays. To get started on your borrowing journey, all you have to do is apply online by sharing your basic information.