When you get a loan, you have to pay it back within a certain amount of time. As you might know, the principal amount and the interest are repaid over certain monthly installments. Here, wouldn’t it be better for customers to have some sort of chart that explains the installment schedule clearly?
Of course. Which is where the loan repayment schedule comes into play. Simply put, the repayment schedule is a chart or a graph that details how you will repay a home loan through a series of regular installments. These installments are commonly referred to as EMIs, comprising the principal amount owed and the interest component.
Alternately, the schedule is also known as an amortization chart or table.
What is an Amortization Table?
The home loan payback schedule is described in the amortization table or the amortization schedule, which the lender shares with the borrower. Amortization is the monthly breakup of the principal and loan interest during the loan tenure. A loan amortization calculator is usually used to create this table. Depending on the loan term and interest rate, the borrower may see how the monthly EMI is going toward principal repayment and interest payments.
In general, your loan repayment schedule will include the following information:
- Installment serial number
- The due date for every EMI payment which comprises the repayment schedule
- Basic information on the home loan
- The opening principal amount which indicates the interest chargeable amount at the start of each month
- The closing principal amount which indicates the remaining principal amount after an EMI will be paid
- Interest rate component
Why is the Home Loan Repayment Schedule Important?
Well, having a home loan repayment schedule handy lets both the lender as well as the borrower keep track of the previous and upcoming installments. Additionally, it also gives a clear picture of the outstanding balance or interest at any point in the tenure.
Interestingly, you don’t have to get a home loan to know its amortization schedule. Certain lenders like PNB Housing allow you to check the schedule while simply calculating the home loan EMI in the initial stages of getting a home loan. This raises an interesting question: how is the home loan repayment schedule calculated? Let’s find out.
Must Read: How to Improve your Home Loan Eligibility?
How to Calculate Loan Repayment Schedule With Home Loan EMI Calculator
The home loan EMI calculator from lenders like PNB Housing simplifies EMI calculations while also letting applicants know the possible home loan repayment schedule. We can say that the repayment schedule is calculated using the EMI calculator tool. After all, calculating the possible EMI for a specific loan amount, loan tenor, and interest rate provides the answer to how one can pay it off in a periodic manner.
Thus, a home loan EMI calculator is an efficient and simple online instrument that estimates your EMIs, total house loan payment, and interest payment schedule all at once.
Do you want to know how an EMI calculator for a house loan works? It uses a formula to calculate the EMI and its repayment schedule basis the principal amount, tenure, and rate of interest entered:
E = [P x R x (1+R)N ]/[(1+R)N-1], where:
P = Principal loan amount
R = Monthly rate of interest i.e., the percentage rate of interest divided by 12
T = Total home loan tenure in months
E = Home loan EMI
But the calculations don’t stop here. This formula simply gives us the monthly EMI. But a loan amortization schedule details what component of the EMI goes towards the principal payment and what goes towards the interest. To calculate this, one can use the following formula:
Principal payment = EMI – [Outstanding home loan balance x Monthly rate of interest]
As an example, let’s consider a loan amount of 50 lakh, a 30-year tenure, a 6% interest rate, and an EMI of 29,978. Using the above formula, we can find out the details of the first EMI payment.
Principal payment for month 1 = 29,978 – (5000000 x 6%/12) = 4,978
Similarly, interest component for month 1 will be 29,978 – 4,978 i.e., 25,000.
In a similar vein, you can calculate the principal payment and interest components of the remaining months by using the above mentioned formula. As you will see, this will give you a table of sorts where the principal component of your EMI will continue increasing while the interest component will keep declining.
PNB Housing’s EMI calculator gives you a year-wise breakdown of your amortization schedule using the same calculation techniques.
Conclusion
Now that you know everything about the home loan repayment schedule, you might be wondering which one will give you a better amortization – a shorter tenure or a longer tenure?
Well, naturally, the shorter the tenure, the shorter will be your amortization schedule. This way, you will be able to save up on the interest component of the home loan. However, your EMI outlay would be higher. On the contrary, a longer amortization schedule means a larger interest component.
However, your monthly EMI will be much more affordable. You can also choose to prepay your loan during the tenure. This will reduce the tenure or your EMIs, and also the total cost of the loan. So, you can take a call depending upon your financial planning.
To know more about how the loan repayment schedule works or can benefit you, don’t hesitate to get in touch with our customer support team at PNB Housing!
