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Are You Calculating Your Emi Manually?

By Author: Aishwarya Mahurkar
Total Articles: 291

EMIs are the equated monthly instalments which borrower has to pay every month to repay the loan issued by a financial institution. This amount that is repaid each month is a combination of the loan amount and interest charged by the bank. The mathematical formula to calculate your EMI is, EMI = P x r x (1+ r) n/ ((1+ r) n – 1).
In this formula,
P = the loan amount
r = interest rate
n = tenure in the number of months


It is not always a good idea to calculate your EMI manually especially when you can simply use the banks home loan EMI calculator. The reason is that there are times when you may calculate the amount incorrectly. In instances where the borrower has opted for a floating interest, the EMI amount would change monthly. Another instance where you’re manually calculated EMI would be incorrect is if you decide to pre pay your loan amount. In such a situation the bank may charge you a fine which would render all your calculations wrong. Below are a few reasons why one must avoid calculating their EMIs manually:


1. Time consuming


The calculation of your EMIs is a complicated and time consuming process. Since most loans last for more than a couple of months, the duration required to calculate your EMI would be much longer. The reason why manually calculating you EMIs is frowned upon is also the fact that as working individuals the calculation is a time consuming process. It is far simpler to just use the home loan EMI calculator provided by your financial institution.


2. Inaccurate


Another major issue with calculating your EMIs for your home loans manually is the fact that there is a possibility of your calculations being incorrect. For those who have chosen for a floating rate of interest it is virtually impossible to correctly predict the interest rate changes. In such cases your calculations might be completely incorrect which may affect your financial planning.


3. Doubtful


The chances that as a borrower you are able to obtain the correct home loan EMI calculator equation is highly doubtful. There are also cases in which your partial payment of the loan affecting the EMIs. The bank provides you the option of either keeping the tenure steady or the EMIs steady in such a situation. If you plan on keeping the tenure steady, then the amount you pay as EMIs each month will be reduced.


The calculation of your EMIs manually is a time consuming process. It is far simpler if you use the Home loan EMI calculator that your financial institution provides you. This will help you plan your finances in a more effective manner.

Author Bio :

The author is a seasoned writer on finance topics and through her writing; she articulates aspects of home loan that are important to people availing the home loans facility. She writes about a variety of topics covering the home loan documents, rates, home loan EMI calculator that help to make the best decision.

Total Views: 85Word Count: 497See All articles From Author

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