A home loan calculator with prepayment is an advanced finance tool for individuals looking to pay an extra payment towards their loan amount. The tool is new to the finance market and helps homebuyers calculate their monthly home loan payments. By putting some simple details you can know about the interest rates as well as the monthly loan payments. What makes this calculator better than other home loan calculators is that it includes the additional payment made on the principal loan amount. This tool is available on different bank’s or home loan lender’s websites. Whether you are taking a loan for construction of house or improvement, this tool will help you in the process. To know more about the use and benefits of this calculator. Keep on reading further.
What is the Use of Home Loan Calculator With Prepayment?
Before diving into the use of this calculator. First, let’s understand what prepayment is. A prepayment is some amount of money paid before deciding on the loan due date. You can pay this amount either in part or full before the loan tenure ends. This helps you in reducing the loan amount as well as the interest rate charged on it. By using the home loan calculator with prepayment you can estimate the extra money you are eligible to pay. To do this, the calculator requires only a few details. These include the outstanding amount, rate of interest, prepayment amount and loan tenure. Based on the details you have entered you can easily find the new EMI amount post the prepayment.
Benefits Of Using the Calculator
Lower Interest rates- The biggest benefit of prepaying the loan amount is the lower interest rates. When you make a prepayment you are automatically reducing your principal loan amount thus resulting in lower interest rates. The sooner the payment you make, the less interest rate you need to pay. However, some banks charge some penalty if you pay some loan amount in advance. Therefore, before applying for the prepayment check the policies of your bank.
Flexible Repayment Option: The home loan calculator for prepayment helps the borrower to adjust their repayment. Sometimes a borrower may have a surplus amount of money on hand. They can use this money to pay a part of their home loan amount in between the loan tenure. This can result in shorter loan tenure and less EMI payment amount.
Credit Score Boost: Paying some part of the loan amount before the completion of the loan can positively boost your credit score. This can help you to secure home loans or any financial support in future easily. This also offers you a sense of financial freedom and security. Besides, if you have a good credit score you can even opt for a second loan for construction of house from the same lender with competitive interest rates.
Reduction in Loan Tenure: Making prepayment on outstanding loan amounts can reduce your loan tenure. Therefore, allowing you to achieve financial freedom and become debt-free early. This is a good option for those who want to take out another loan or want to reduce their financial load before retirement.
Conclusion
If you are someone who has some spare money and wants to take the load of loan from your shoulders then a home loan calculator with prepayment can help you in this process. It gives you insights into the repercussions of a down payment on your existing loan for construction of house. Understanding the benefits of the prepayment can help you make an informed decision in your homeownership journey.