At the time of taking a house loan, the two most important things are the total interest and the monthly installment amount. It is important to have accurate knowledge about both of these elements in order to have an affordable housing loan. The rate of interest that you need to pay for your housing loan depends upon your eligibility and the loan provider. If you end up getting a low rate of interest, the monthly installment will also get reduced.
The home loan interest rate is added to the principal loan amount at the time of calculating the monthly installment of the housing loan. It is crucial to calculate the interest payout on the monthly installment. Interest payout is definitely done on a monthly basis when you pay your housing loan for a particular loan tenure. Let us understand how the monthly installment and interest payout are calculated in a home loan.
How is the EMI on a loan calculated?
The formula for EMI calculation is:
P x R x (1 + R) N / [(1 + R) N-1]-
P is the principal loan amount.
N denotes the loan's term in months.
R is the monthly interest rate.
The rate of interest on your loan is calculated per month.
R = Annual Interest Rate (12/100)
For example, if the rate of interest is 7.2% p.a., then r = 7.2/12/100 = 0.006. If a person avails a loan of 10,00,000 at an annual interest rate of 7.2% for a tenure of 120 months (10 years), then his EMI will be EMI = 10,00,000 * 0.006 * (1 + 0.006)120/(1 + 0.006)120 – 1) = 11,714.
How to get a low-interest payout on a housing loan?
If you want an affordable rate of interest on your housing loan, it is important to meet all the criteria for eligibility. The eligibility parameters like credit score, income, business stability, employer, job stability, cash flow, and debt-to-income ratio will be determined by these. When you meet all the eligibility criteria, your loan provider will have no issue offering you a low rate of interest. When the risk is low, eventually the interest rate also decreases.
Use a loan calculator for interest and monthly installment payouts
You can't afford to complicate things and end up with miscalculations in your loan, no matter how good you are with numbers. Borrowing is very essential and needs to be done in the right manner. It is important to use a loan calculator. A loan calculator makes calculations easy and accurate. It becomes easy to calculate your EMI and rate of interest. This is good because you can calculate and compare various loan providers.
Wrapping up
Use a home loan calculator to calculate your home loan interest rate. While applying for a home loan for salaried, make sure you have all the home loan documents required.
Comments