Home Loan Part Payment - Reduce EMI or Tenure? [Excel Calculator]

Home Loan Part Payment Reduce EMI or Tenure? [Excel Calculator]
In this video by FinCalC TV we will see what is home loan part payment or prepayment and whether you should reduce EMI or tenure after making prepayments in hindi with the help of excel calculator. Prepayment is a way to reduce the remaining principal balance in your home loan and is the best way to close your home loan before time. We will see home loan prepayment examples using excel calculator and compare saving of interest amount with reducing tenure and EMI.
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CHAPTERS:
00:00 Home Loan Part Payment Intro
00:45 What is Home Loan Part Payment?
01:45 Reduce EMI or Tenure?
02:23 How to Calculate EMI in Home Loan
05:27 Home Loan Part Payment Example
07:51 Reducing EMI after Part Payment
09:37 Reducing EMI vs Tenure Comparison
10:18 Conclusion
WHAT IS HOME LOAN EMI CALCULATOR
Home Loan EMI Calculator helps you to calculate home loan EMI (Equated Monthly Installment). This calculation helps you in planning for loan to buy or construct new house so that you get the idea of monthly loan EMI you will be paying.
Loan EMI Calculator also helps you to know the Total Interest you will be paying throughout your loan tenure. The Total Amount you pay to close your loan is Loan Amount + Total Interest
HOME LOAN EMI CALCULATION METHOD
- Home loan EMI can be easily calculated in excel using PMT function
- PMT function takes 3 parameters: Interest Rate, Remaining months and Principal value remaining
- Interest rate provided should be the monthly home loan interest rate divided by 100
- Remaining months is the number of months remaining for which EMIs are yet to be paid
- Principal value is the outstanding principal amount remaining in your loan account
- Remember, your EMI consists of 2 things: Principal Amount and Interest Amount
- Interest Amount is high initially, and decreases with time
- Principal Amount is low initially, and increases with time
COMPONENTS OF LOAN EMI
- Basically there are 2 components of loan EMI - Principal Amount and Interest Amount
- Principal amount is low initially and increases with time
- Interest amount is high initially and decreases with time
- Majority of Interest amount is paid by you during the first half of your loan tenure
- As you move towards your loan closure by paying all EMIs on time, very less interest if left to be made making it difficult to save loan interest using loan prepayment option
- Thus, it is recommended that if you are making loan prepayments to save interest, make the payments during initial half of the loan so that you can save maximum interest on your loan
- Car Loan EMI is also calculated in same way as above
FACTORS AFFECTING LOAN EMI
- 2 factors affect Loan EMI - Interest Rate and Tenure
- Higher the interest rate, more interest amount you will be paying
- Longer the tenure, more interest amount you will be paying
- You should try to take loan with minimum interest rate and tenure to save maximum interest amount
HOW TO SAVE LOAN INTEREST
- As mentioned above, loan interest can be saved by either choosing loans with low interest rate, choosing less tenure or by making loan prepayments on existing loans
- Remember to reduce tenure while making loan prepayments to save maximum interest on your home loan
- Reducing EMI will not save your loan interest to maximum extent compared to reducing tenure
#HomeLoanPartPayment #HomeLoan #fincalc
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DISCLAIMER:
Examples and demo used are for Illustration purpose only and might not cover every detail of examples shown.
I Am Not A SEBI Registered Adviser. All The Information Provided By Me Are For Educational/Informational Purposes Only. We Do Not Take Any Responsibility For The Accuracy Of The Data But As It May Contain Typographic Or Other Errors And Inaccuracies And We Expressly Disclaim Liability For Any Errors On The UA-cam Channel (FinCalC TV). Please consult your Financial Advisor before taking any decision or action in terms of your Finances.