Loans are boons during times of financial crisis. There are two types of loans: secured and unsecured. While unsecured loans have higher interest rates due to no collateral requirement, secured loans are lucrative funding options that pledge your property as collateral and offer lower interest rates in return. Both loan types have pros and cons, but monthly EMIs are the most important concerns you must contemplate. In the case of a mortgage loan, a Loan Against Property EMI Calculator helps calculate EMIs for various loan terms.
The EMI calculator is an excellent tool that lets you choose a repayment term according to the EMI amount you can easily afford to repay. However, you must use it carefully to make the right borrowing decisions. Here are the top five mistakes to avoid when using EMI calculators.
How Does an EMI Calculator Work?
An EMI calculator is an extremely useful tool to help aspiring borrowers calculate their loan EMIs. Since most lending institutions are flexible with their loan terms, you are free to choose a tenure with easily affordable EMIs. Using a Loan Against Property EMI Calculator, you can calculate EMIs for various loan terms and finalise one that best suits your budget. The online tool uses the following formula to do the calculations:
EMI = [P x R x (1+R)^N]/[(1+R)^N-1]
Here, P = Principal loan amount, R = Rate of Interest, N = Number of months in the selected loan tenure. Enter these variables carefully to get the requested results within a flash second.
Steps to Use an EMI Calculator
While taking a secured loan against an asset, you may use a Loan Against Property EMI Calculator to calculate your monthly EMIs and make an informed borrowing decision. Follow these steps to do that:
- Visit the lender’s website and open their EMI calculator.
- Enter the loan amount you want to borrow.
- Enter the interest rate the lender offers you based on your eligibility, credibility, and repayment capacity.
- Select a tentative repayment tenure.
- Get detailed information about your EMI amount, interest cost, and total loan cost.
Benefits of Using an EMI Calculator
An EMI calculator lets you accurately plan your repayment with maximum affordability and financial savings. Here are a few advantages of using the online tool:
- Helps calculate EMIs according to your monthly budget
- Saves time required for manual calculations
- Avoids chances of errors when calculating EMIs
- Make the calculation process much easier and faster than manual methods
Mistakes to Avoid
While an EMI calculator is an excellent tool for calculating loan EMIs and getting the desired results in a flash second, not using it appropriately may lead to unpleasant surprises later. So, here are a few mistakes to avoid when using an EMI Calculator for Loan Against Property:
Choosing a Longer Repayment Tenure
Many lenders give you ample time to pay back the loan. The longer the repayment tenure you choose, the smaller the EMIs will be. That means their repayment will become easily adjustable to your monthly budget. However, a longer repayment term increases your total interest outgo and loan cost. A longer-term will increase the number of EMIs in your tenure, each with an added interest cost. So, don’t make the mistake of choosing an unnecessarily long repayment term to save money on the interest outgo and become debt-free sooner.
Choosing a Shorter Repayment Tenure
Since a shorter repayment tenure will save interest costs and help you repay the debt sooner, choosing the shortest repayment term that the lender allows will seem an intelligent choice. However, avoid that mistake either. Reducing the length of the repayment tenure will increase the EMI amount because the lender will divide the total loan cost into fewer installments. Don’t opt for a shorter repayment tenure with EMIs; you cannot adjust conveniently to your monthly budget.
While using a Loan Against Property EMI Calculator, keep adjusting the loan tenure until you find a repayment plan with easily affordable EMIs. The best trick is to choose the shortest possible loan term with EMIs you can easily manage to repay each month.
Borrowing More Than the Requirement
Many reputable lending institutions have easy mortgage loan criteria, based on which they offer a high LTV ratio of as much as 75%. That means that if your asset is worth Rs 10 Lakh, you can borrow up to Rs 7.5 Lakh. However, that does not mean you must take all that is available to borrow. Evaluate your expenses and decide upon an adequate amount sufficient to cover your needs. Avoid over-borrowing, as it will unnecessarily stress your finances and make repayment more challenging to manage.
When using an online calculator, pay attention to the EMI amount and your loan requirement. Apart from adjusting your repayment tenure, you can change the loan amount to decrease or increase your EMI amount.
Not Comparing Loan Schemes
Once you finalize your loan amount and repayment tenure, compare different loan schemes to see which plan best suits your monthly budget. Compare interest rates from various loan providers and enter the correct variables to see how they affect your EMI amount and total loan cost. Moreover, compare their processing fees, additional charges, customer service, and other parameters to finalize your decision.
Entering Incorrect or Unnecessary Details
Double-check the details to get accurate results when using a Loan Against Property EMI Calculator. However, provide only necessary information about your identity and finances in the online tool. Use an EMI calculator from a reputable platform that has no chance of fraud or identity theft. An EMI Calculator only needs your loan amount, interest rate, and repayment tenure. Avoid using a tool that requests any other financial or personal details.
Conclusion
When using a Loan Against Property EMI Calculator, it is important to avoid these common mistakes that might lead to inaccurate results or inappropriate decisions. By entering accurate variables, you can calculate correct EMIs with more precise calculations. Using an EMI calculator effectively enables you to make informed decisions and manage your loan repayment responsibly.