After a few years into your housing loan tenure, there might come a time when you have a sudden increase in your finances and decide to prepay the loan. No doubt, loan prepayment is a viable option to take the EMI burden off your shoulder. But should you take the leap? You can use a home loan prepayment calculatorto decide.
It is an excellent financial tool that will help you find out how much money you will save with prepayment and how it will affect your loan EMI.
But before we understand how a loan prepayment calculator works, let’s take a closer look at loan prepayment.
What is home loan prepayment?
To prepay a loan means to make a lump sum payment towards the loan before the end of the tenure. And is payable over and above the EMI payments.
Because longer loan tenure leads to an increase in the total interest outgo, part prepayment of your home loanis an effective way to reduce your interest payments and thus, your debt burden. Loan prepayment usually entails either a reduction in the loan tenure or a decrease in your EMI payment. Either way, it helps you save significantly on your loan payments.
However, before opting for loan prepayment, you must know about the prepayment charges you’ll need to pay to check if it is a viable option. This is where a housing loan prepayment calculator comes handy.
Additional Read – Detailed Guide on How Home Loan Repayment Works
How does a loan prepayment calculator work?
A housing loan pre-payment calculator is an online tool that lets you determine the viability of opting for the prepayment option. Most online calculators will help you determine four crucial factors of the loan when you go for prepayment –
- The percentage/amount of EMI saved
- Due EMI amount
- Revised EMI amount
- Revised loan tenure
In this way, you can determine how much you can save and your revised EMI amount.
While manual calculations can be complex and time-consuming, the online calculator is fairly easy to use. All you need to do is enter the following loan details –
- Outstanding loan amount
- Loan tenure
- Rate of interest
- Prepayment amount you wish to pay
Once you input the details, you can find out your overall savings from choosing the loan prepayment option.
Benefits of loan prepayment calculator
A housing loan prepayment calculator can help you decide the profitability of making a prepayment against your loan and manage your finances accordingly. It helps you reduce the outstanding loan amount and make the EMIs more affordable. This also results in reduced home loan interest rate outgo, which brings down the loan cost further.
Additional Read – Home Loan Guarantor Guide: Things to Know
Consider prepayment only if you are saving a significant amount against your loan. But if you’re looking for a balance transfer to make EMI affordable, then get in touch with us at Tata Capital. With relaxed home loan eligibility, attractive interest rates, and a simple online application process, we offer the best services on your housing loan.
Estimate your expenses using our online home loan EMI calculator and get started today!