Home loans are offered to those people who wish to buy or construct their dream project or other form of residential property across any part in India. It is secured form of loan meaning that banks or financial companies extends credit to the borrower against the home or property as collateral safeguard towards them. Once the borrower repays the amount taken from them, including interest rates, the ownership of the property is fully transferred to the borrower's name.
Lenders offer home loan at certain interest rates, which could be fixed or floating basis. The repayment amount that is due over the entire loan period includes the original loan amount (known as the principal), interest rates, some processing fees and pre or post penalty charges (if applicable).
Let's understand how home loan interest calculation works:
Every month you pay some money to the banks or financial companies in the form EMIs where some part of it goes towards interest and remaining towards principal repayment. So each month you're reducing your loan by some extent and you will pay lesser interest for the next installment. With each passing year, your loan gets paid by some amount and the balanced amount keeps on reducing resulting in paying lesser interest month-on-month and year-on-year and the day comes when you fully close your loan. These interest rates are calculated on the fixed or floating basis as per your policy structure and option you choose. While a fixed interest rate can give you the projected picture well in advance, floating basis will give idea once the rates are declared by banks or financial companies in their quarter analysis.
Each banks has its own pattern of home loan emi calculator which can vary based on the customer's credit profile. The interest rates depend on various factors like availability of money in the market (liquidity), inflation and monetary policies. They are categorized in two ways fixed rate or a floating rate. For fixed rate loans, the ROI remains constant throughout the loan period, while in floating rate loans, the ROI is linked to market activities. Each bank selects its own methodology to fix this base rate. These rates have to be declared by the bank each quarter.
Some private sector banks have incorporated innovative and customer friendly ways for loan repayments. They have some form of adjustable home loan interest rates, Trufixed loan (2 to 3 year fixed rate variant) or Trufixed loan (10Year Fixed Rate Variant). These loans can be taken at interest rates as low as 9.40 to 10% and with fixed or floating rate base plans. They cater loan for different segment of the people like for individual or women oriented concessions, etc.
Taking loan means a big decision of your life. A little bit of mis-calculation can burn a big hole in your pocket. The decision has to be carefully scrutinized and move ahead. To ease your mental burden banks and finance companies have come up with easy home loan interest calculation methods online. They are interest calculators which help you cut down the hassles of usually tedious and time consuming manual. There is a loan amortisation table that will further break down your monthly EMI into the principal and interest components and will give you an idea of exactly how much interest you are paying over the entire period of the loan. Home loan interest calculators help you estimate the potential savings on your loan amount making it affordable and easier on your pockets in the near future.
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