Individuals must measure how much financial stress they can tolerate during repayment tenor before availing home loans. An instalment beyond their usual capacity can lead to a credit crisis, resulting in missing instalments on time.
- The home loan delinquency rate reached 2.49% as of the 3rd quarter of FY2021
- India’s lending industry has encountered an increase in home loan default by 23 basis points on year on year basis till Q3FY2021
Intending borrowers can easily avoid missing out on repayments using housing loan calculator. This is an effective tool to gauge the instalment amount according to a specific tenor. Let’s see how individuals can save themselves from credit risk by utilising this effective tool:
What is a Housing Loan Calculator?
Before unfolding the purposes of using a housing loan EMI calculator, individuals must know about this tool.
This calculator is a computerised web-based tool that facilitates individuals determining the EMI amount of a housing loan. They need to input values like the loan tenor, credit amount and interest rate in the appropriate boxes to configure monthly payables.
Individuals can obtain this calculator from the official websites of lending institutions. Lenders keep these useful tools in their website repository so that their customers stay informed about their upcoming financial obligations before availing a home loan.
Benefits of Using Housing Loan Calculators
Following are some benefits of utilising a housing loan calculator:
1. Correct calculation of instalments
Individuals can correctly calculate their home loan instalment amounts with this calculator. They just have to provide a minimum effort to fill in the inputs, including the credit amount, interest rate and repayment period. After submitting this, they can view the correct housing loan EMI amount displayed on the calculator page.
2. Planning finances
Using housing loan calculators, individuals can stay aware of the EMI amounts they have to settle against their borrowed capital. By approximating these payables, they can plan on repaying the dues. It can significantly help them avoid their impending financial exigencies. As a result, they do not have to face the unnecessary outcomes of defaulting on their home loan EMI.
3. Selecting a suitable loan tenor
Individuals can choose a short tenor prudently because the repayment period significantly influences their cost of borrowing. The longer a borrower takes time to repay the debt, the higher the overall borrowing cost. However, that does not mean individuals have to choose a shorter tenor without monitoring the respective instalment amounts. A shorter tenor increases the instalment amount; consequently, it can be beyond borrowers’ credit limit.
Therefore, they need to check how much the instalment amount is against a particular tenor using the EMI calculator for a home loan. It will assist them in choosing the befitting tenor and keeping themselves out of the risk of staying behind on repayments. However, there are also other ways to trim home loan tenor if they want.
4. Comparing loans offered by different lenders
All lending institutions may not provide similar benefits. For example, the home loan interest rate and other charges, including processing fee, service cost, documentation fees, etc., may differ across lenders. So, individuals must not choose a lender only by viewing borrowing rates. Instead, they should utilise this calculator to know the impact of applicable interest rates on the overall interest outgo. Along with this interest component, they need to add all those charges to know the total cost of borrowings. Borrowers need to compare this overall borrowing cost while selecting a preferred lender.
For example, the interest outgo for Lender A and Lender B is respectively Rs.30000 and Rs.29000. However, individuals need to pay Rs.5000 and Rs.6500 for Lender A and Lender B, respectively. Therefore, it will be profitable for a borrower to take a home loan from Lender A because it will save their cost of borrowing by Rs.500.
Apart from these factors, individuals must know several aspects before taking a home loan to avail the best deals.
Furthermore, several financial institutions help their customers with pre-approved offers on their financial products like home loans and loans against property. Undertaking these benefits, individuals can substantially streamline their loan applications. Existing customers can check their pre-approved offers online by entering their names and contact details.
In conclusion, borrowers can leverage the housing loan calculators to determine the suitable tenor and respective instalments. This way, they can maintain a healthy financial balance and pay off their dues without struggling.