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Housing Loan EMI Payments What is an EMI_WC

When you borrow a Home Loan, you are required to pay back the principal amount and the interest accrued in the form of Equated Monthly Instalments, also known as an EMI. This amount is a fixed amount that only changes if there is any change in the Home Loan interest rate. You must pay your EMIs every month, as the name suggests, to keep up with the repayment schedule planned at the time of your Home Loan approval.

The benefit of repaying your Home Loan through fixed EMIs is that you can create a predictable repayment schedule that has already taken your monthly repayment capacity into account. The amount is also deducted at a pre-determined date every month, allowing you a buffer to ensure that the amount is ready in your bank account.

With each passing EMI, you steadily reduce your repayment amount, making it necessary to keep up with your EMI payments. Furthermore, missing your EMI payments may result in penalties and stringent action.

To arrive at your final EMI amount, the lender considers the following factors: 

  • Your Home Loan Amount: Your Home Loan amount or the principal amount is the basis on which the EMI payments are decided, as one of the two components of the EMI is the principal amount. 
  • Your Home Loan Interest Rate: The rate of interest at which you borrow the Home Loan also factors into your EMI account, as the second component of the payment is the interest accrued on your principal amount.
  • Your Home Loan Repayment Tenor: How long it takes to repay the loan decides the size of the EMI; if you choose a short repayment tenor, you end up paying a higher EMI amount but save on interest outflow. On the other hand, a longer repayment tenor ensures small EMIs, but for a longer duration – increasing your total cost of borrowing. 

The final EMI amount is calculated based on all the factors listed above. Before you make your Home Loan application, You can use the Home Loan EMI Calculator to get a tentative idea of how much you may have to pay as an EMI. The amount is calculated based on the inputs provided by you, such as your desired loan amount, interest rate and preferred repayment tenor.

As specified by the Reserve Bank of India, borrowers must start paying their EMIs from the month following the month in which the full loan amount was disbursed.

So, if your monthly EMI debit date was fixed on the 5th and your total Home Loan amount was disbursed on the 18th of the month, then your first EMI will be deducted on the 5th of the following month.

However, note that in scenarios when the Home Loan is disbursed in parts for an under-construction property, borrowers may be required to pay a pre-EMI. The pre-EMI comprises only the interest tallied on the principal amount and not a combination of both.

Borrowers are advised to keep up with their EMI payments to avoid defaulting on their Home Loans. This can be achieved by planning of time and employing the help of online tools, such as a Home Loan EMI Calculator.

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