What Is Loan Eligibility and EMI Calculator? A Detailed Guide

There is no place like home. No matter where in the whole world you travel to, the comfort and peace that you get when you enter your home remains unparalleled. Probably that is why owning a home is both a basic human need and an important financial goal too. However, with inflation soaring high, it is quite difficult to purchase a house entirely with your savings. Thankfully, home loans can come to your rescue!

Home loans are an easy way to finance your dream home. It is very simple to avail a home loan, but only if you are eligible for it. There are some specific eligibility criteria laid down by the lenders that you need to fulfil to avail a loan. As home loans involve a huge amount of money, the lender has the right to reject your loan application if you fail to fulfil the eligibility criteria.

If you have been planning to take a home loan, it would help if you have adequate knowledge about home loan eligibility and a home loan EMI calculator. Read on to know more.

What Is Home Loan Eligibility?

Home loan eligibility is a set of defined criteria through which the lender assesses your creditworthiness and processes the loan application. Various factors determine if you are eligible for a home loan or not. While these factors vary from lender to lender, the most important eligibility criteria are:

• Age

The minimum age for home loan eligibility varies between 18 and 21 years, while the maximum age allowed is usually between 60 and 65 years.

• Income and Job Profile

The main aim of checking eligibility is to ensure that you can repay the loan. Lenders look out for borrowers who have a stable job profile and income. It could be an issue if your income is below their eligibility level or you have switched too many jobs. This could make them doubt your repayment capacity.

• Financial Capability

Lenders check your financial status and current debt obligations to assess if you will be able to pay EMIs on a timely basis. Lenders can check your credit report to see if you have taken any other loan and if there are any negative remarks on your report. If you have been rejected for a loan in the past, it could impact your eligibility.

• Credit Score

Credit scores are indicators of your creditworthiness. A credit score of 750 and above is considered to be a good one. However, a lower score might lead to loan rejection.

What Is an EMI Calculator?

An EMI calculator is an online tool that helps you determine the EMI and the total interest to be paid towards the loan repayment. With a home loan EMI calculator, you can compare different loans and check if the EMI is affordable for you.

EMI Calculator Works Basis the Following Formula –

E = P * r * (1+r)^n / ((1+r)^n-1)

where

E is the equated monthly instalment amount,

P is the principal loan amount or the loan you want to take,

r is the expected rate of interest calculated monthly.

To use an EMI calculator, input the values of your loan amount, loan tenure and expected interest rate. You can enter the values directly or use the sliders given on the calculator.

An EMI calculator helps you determine the total repayment amount, the interest payout and your monthly EMI within a fraction of seconds. It also helps you decide if you can afford the loan amount that you are planning to avail. You can make changes in the values and use the EMI calculator multiple times to arrive at the most suitable loan tenure and amount as per your financial capability. The key benefit of an EMI calculator is that it helps you plan your finances better and prepares you for the loan beforehand.

Now that you are aware of the two crucial elements in the process to get a home loan, make sure you take an informed decision or prepare for the future home loan accordingly.