How are the EMIs Calculated on Home Loans?

Accurate calculations of interest and EMIs are essential when estimating the loan amount. For this, potential borrowers can manually calculate them or use an online home loan interest calculator and EMI calculator. 

Manual calculation of interest 

Individuals can use the following formula to calculate the interest:

Interest = P(1 + R/100)^N - P

Here, P is principle, R is interest rate, and N represents the credit tenor. 

Manual calculation of EMIs 

Borrowers can use the formula below to determine the EMI:

EMI = P x R x (1+R)^N / [(1+R)^(N-1)]

However, the value of P is usually enormous, which makes the calculations complex, resulting in an increased chance of errors. Hence, borrowers usually prefer to use online home loan interest calculator for accurate estimation. 

Steps to use an online interest calculator

One can follow the steps below to calculate interest online:

Step 1: Visit the official website of a financial institution.

Step 2: Select the ‘Home Loan’ tab.

Step 3: Move to the interest calculator section.

Step 4: Adjust the sliders to select the principal, rate and tenor.

Once done, the result becomes instantly visible. An online EMI calculator, too, works in a similar way. 

Steps to use an online EMI calculator

Below are the steps to use an online EMI calculator:

Step 1: Visit the official website of a financial institution and select the ‘Home Loan’ tab.

Step 2: Move to the ‘Home Loan EMI calculator’ page.

Step 3: Input the loan amount, rate of interest and tenor by adjusting the pointers to view results.

Due to the quick and accurate results, both home loan interest calculator and EMI calculator have gained massive popularity. However, it is essential to enter the correct values to get accurate results.