EMI is one of the most important aspects of a home loan. It is the amount you repay every month to the lender. The amount you pay must be affordable, or it can seriously affect your overall finances. Read on to know the importance of calculating the EMI before availing a home loan.
Availing a home loan is probably one of the most significant financial decisions you may take in your life. The affordability of the home loan greatly depends on the EMI (equated monthly instalments) as this is the exact amount you must repay every month until the end of the loan tenure. It is therefore paramount that you carefully choose the right lender who offers loan at a competitive interest rate. Getting a loan at a low-interest rate will automatically lower your EMI and help you manage your overall finances better in the long run. Below-mentioned are the benefits of calculating the EMI before applying for a home loan:
Know the exact amount you must borrow
While applying for a home loan, most people tend to get over ambitious and apply for a higher loan amount than they can afford to repay. Consequently, the struggle to repay the EMI and face financial hardships. To avoid this, you must calculate the EMI well in advance so that you arrive at a figure that you can easily afford to repay and fits within your monthly budget.
To calculate the EMI amount, you can use the online EMI calculator. The tool is easy to use; you must enter a few basic details like loan tenure, interest rate and the loan amount you wish to apply, and the tool will automatically calculate the EMI. You can vary the amounts until you are sure that the EMI is affordable for you. Thus, calculating the EMI beforehand allows you to be better informed while applying for a home loan.
Plan the repayment in a better way
Once you are sure about how much you can afford to borrow, you can alter the tenure to determine the EMI. This will help you plan the repayment in a better way. Once you know the figure, you will automatically strive to save the amount every month and make sure that the EMI is paid on time. Also, since you know the figure, you can assess your other expenses and see where you can cut back to make sure that the EMIs are not compromised. This planning will help you remain stress-free throughout the loan tenure. Also, by repaying your EMIs diligently, you can avoid any EMI bounce fees or any penalty charges.
Plan for prepayment
By knowing the exact amount, you must repay on every month for your home loan, you can start planning for the prepayment and pay off the debt sooner than the actual tenure. This will not help you get rid of the loan faster but also allow you to save a significant sum you repay as interest. You can time your investments wisely to coincide with your home loan tenure and prepay the amount quickly. You must know that most lenders charge prepayment fees, which is usually about 1% to 2% of the outstanding amount.
Now that you know the importance of calculating the EMI before applying for a home loan use the online EMI calculator to your advantage and manage your repayments in a stress-free manner.