Knowing how to manage and service your loans in the best possible manner is critical. In your arsenal, one of the strongest weapons is going to be a home loan prepayment calculator. In this blog, we shall go through how you can use this calculator to your advantage and how it works with a home loan EMI calculator.
Understanding Home Loan Prepayment
Prepayment refers to the act of paying extra money against your home loan apart from your regular EMIs. Prepayment shall reduce the outstanding principal and, hence, the total interest you are required to pay for your loan. Prepayment can either be partial or full. In the case of partial prepayment, a part of the outstanding balance is paid off; in full prepayment, the entire outstanding amount is settled.
The Role of a Home Loan Prepayment Calculator
An online calculator called a home loan prepayment calculator will help you see the impact of prepaying your loan. In this, you can feed in multiple details, viz., your outstanding loan amount, interest rate, and how much you intend to pay in advance. It then calculates how much money one can save by way of interest payment and how the loan tenure is going to be cut short.
For instance, say that you receive a bonus at work that you would like to use in part to prepay on your loan. This calculator will allow you to see exactly how this decision is going to benefit you financially. You get to know how much interest burden will be reduced because of the prepayment, and the tenure of the loan gets shortened. This will help you decide whether to go ahead with the prepayment.
How to Use a Home Loan Prepayment Calculator
A home loan prepayment calculator works on very basic lines. You will have to feed the following information:
- Outstanding Loan Amount: This is the amount that remains unpaid towards your loan.
- 2. Interest Rate: The rate at which your home loan was approved.
- Prepayment Amount: The additional money you intend to pay towards your loan.
Feed these details into the calculator, and it will calculate how much interest you might save and how many years of loan tenure you can reduce. You get an idea of the long-term financial gains of making prepayments.
A Home Loan EMI Calculator to Complement
While a home loan prepayment calculator shows you the benefits of extra payments, a home loan EMI calculator will help you to plan properly for the monthly payments. This calculator will ask you about the loan amount, tenure of the loan, and interest rate, and will give an exact amount that you need to pay every month. By using this calculator, you can therefore budget your finances and be assured that the loan payments will be manageable.
These calculators, used in conjunction, provide a complete picture of how your home loan is being handled. While the home loan EMI calculator assists you in planning your monthly expenses, the home loan prepayment calculator will demonstrate how additional payments can result in money saved over time.
Advantages of a Home Loan Prepayment Calculator
- Interest Savings: When you make a part-prepayment on your loan, it brings down not only the principal amount but also the interest burden directly. This is calculated by the home loan prepayment calculator to present a clear picture of how much you can save.
- Reduced Loan Tenure: Prepayments can appreciably bring down your loan tenure, thereby making you debt-free early in life. The calculator shows this impact on the loan period so that you may plan for a payoff at an early date.
Conclusion
In a nutshell, the home loan prepayment calculator can help you save money on your home loan. It is one of the good tools to be used in conjunction with the home loan EMI calculator for effective management of loan repayments, alleviating the interest burden, and thus making one able to plan a financially secure future.
