An EMI depends on many factors, like your loan amount, repayment tenure, and housing loan interest rate. It is always a good idea to research and understand which lender offers you the best EMIs. 

What is EMI?

Equated monthly instalment (EMI) is the set of monthly payments you make while repaying a loan. This amount is deducted from your account until the loan repayment is complete. An accumulation of EMIs is the resultant loan payment.

EMIs are the building blocks of any loan repayment. So consider various EMI options before zeroing in on the one that best suits you. 

Factors influencing EMI

Income

The salary/income of the borrower is an integral factor in the EMI amount. The lender determines your EMI based on your average monthly income. It is usually around 40% of the monthly income of the borrower. It ensures the individual has enough money for their day-to-day expenses and savings. A higher monthly salary can get you a higher EMI and make your repayment easier.

Interest Rate

Interest rate is another factor influencing EMI. The type of interest rate you choose, such as fixed or floating, determines your EMIs. With floating interest rates, you can get a lower interest, but it depends on the market, so the risk is high. It means your EMI will fluctuate with the market conditions. 

A fixed interest rate is consistent throughout the repayment tenure. It means you pay a fixed EMI monthly for the chosen repayment tenure. Opting for a minimum home loan interest rate is a good decision in the short term. However, it can lead to a higher EMI, which you might not be able to afford. 

Personal Expenses

Before zeroing in on your EMIs, you should calculate your monthly expenses and anticipate future ones. You must retain or set aside enough funds for health emergencies, weddings, social events, etc. 

It is wise to maintain your savings for investments and then decide on your EMI rate. Doing this keeps your financial health in check as you repay your loan amount. 

Advantages of calculating EMI 

There are many online Home EMI calculator, which make the job of EMI calculation simple and efficient. You must provide key values like repayment tenure, loan amount, and interest rate, and you will get your EMI amount immediately. Thanks to the internet and technology, we have this facility at our disposal. Many banks provide this facility online, free of charge, to help loan seekers.

Let us look at the benefits of calculating your EMI before you apply for a Home Loan.

Deciding the loan amount

Understanding exactly how much EMI you can afford helps you estimate the loan amount and the repayment tenure. It helps your financial health as you are not just blindly going for the loan but evaluating it and understanding your finances. 

This way, you can choose the exact loan amount that will match your needs while leaving enough money for your expenses and investments.

Repayment Benefits

Calculating EMI helps you plan your loan repayment accordingly. Knowing the exact amount of your EMI beforehand and with the assurance that everything is going according to plan is good news for your mental health. It is a very underrated aspect of loans, as it allows you to be stress-free instead of worrying about repayment.

Planned Prepayment

If you have an estimate of the EMI, you can opt for prepayment of the loan to reduce the amount of interest you pay overall. Instead of paying extra on the interest rate, you can invest your saved money through other mediums and use the profits to prepay your loan. It is a wise financial decision that helps you save valuable money.

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