Availing a home loan? Make sure to calculate your EMI beforehand!
The price hike in the real estate sector has led to increasing demand for home loans. Due to this, a large number of banks and other financial institutions provide home loans with lucrative features. Therefore, if you are looking forward to purchasing your dream house, a home loan can be a great financing option. Some of the important aspects that you should consider while availing a home loan are reduced interest rate, flexible repayment option, low processing fee, and long tenure. Home loans with competitive interest rates can help you save a large amount of money in the long run. Interest rates also play a crucial role in defining your monthly installments.
Fixed and Floating interest rates
While availing a home loan, you have the option of choosing between a fixed or floating interest rate. In case of a fixed rate of interest, the rate is fixed throughout the tenure of the home loan and consequently, the EMI stays constant throughout.
On the other hand, in case of a floating rate of interest, the interest rate may change depending on the market fluctuations. The change in interest rate will also lead to a change in the EMI amount of home loan, whereas the loan tenure would remain constant.
Since the concept is to have a constant EMI, financial institutions typically adjust the tenure when interest rates change. Therefore, when the interest rate increases, the tenure goes up proportionately, whereas EMI and home loan amount remain constant. Similarly, if the interest rate decreases, the loan tenure comes down proportionately but the EMI and home loan amount remain constant.
Importance of calculating EMI beforehand
While availing a home loan, you can calculate your EMI beforehand with the help of an online home loan EMI calculator. This will allow you to plan your monthly expenses wisely. Since the EMI amount remains the same for most of the tenure of the home loan, you can plan your budget in a much better way. This will allow you to make timely payment and prevent you from defaulting on your home EMI.
Having an estimate of your EMI in advance, before the start of your home loan will also allow you to do your prepayment planning. This can help you reduce your interest payments and pay off your home loan sooner. For instance, you can time your investments or save money every month to coincide with your home loan tenor and make part-prepayments with ease. Nowadays, you can also customize your loan to best suit your requirements. You can choose a loan tenure depending upon your repayment capcity and monthly income. By doing so, you can avoid defaulting of your home loan. Since home loans are self-secured loans, it’s timely repayment should be your prime responsibility. This is because, the lenders will have the complete authority to seize your property in case you fail to repay your home loan within the stipulated time.
Now that you are well aware of the importance of calculating the EMI beforehand, ensure that you make the most of it while availing a home loan. With prominent banks and other NBFCs, you can easily avail a home loan through a hassle-free online application process. Flexible eligibility criteria and minimal documentation, instant approval and quick disbursal of the loan amount are some of the added advantages of availing a home loan with leading financial institutions. Lastly, do not forget to read the terms and conditions of the home loan agreement carefully before signing it. This will help you avoid any inconvenience in the later stage.