Use of ICICI Home Loan EMI Calculator Imperative Amid Surging Interest Rates

In the last 3-4 months, the rising interest rates have grabbed headlines in most financial journals, be it the print or electronic. After a spate of rate easing for three consecutive years starting from 2015, the cycle has now reversed with rates climbing up. The recent 25 basis point hike in the repo rate by the Reserve Bank of India (RBI) on June 6, 2018, would only bring a further rise in the lending rates.

There are many reasons for the same including the risk to upside inflation emanating from the rising crude oil prices. Home loans, since they are generally offered on a floating rate basis, get influenced the most with changes made by banks such as ICICI Bank with respect to Marginal Cost of Lending Rate (MCLR), an interest rate benchmark used by the lenders these days.

Now that the rates are going up, the need to introspect the loan cost becomes even more important. In this edition, we will focus on how should you use ICICI Home Loan EMI Calculator to plan your journey in the face of surging interest rates.

A Brief on ICICI Home Loan EMI Calculator

ICICI Bank has raised the MCLR by up to 25 basis points in 2018. Just before RBI’s monetary policy announcement, ICICI Bank hiked 1-year MCLR by 10 basis points, following the 15 basis point hike it made in March.

Now, the private lender offers a ICICI home loan at an interest rate of 8.55%-9.05% per annum. The interest rate is one of the key elements deciding the shape of repayment that can lengthen to as long as 30 years. The bank can offer a loan even beyond?5 crore, based on the income, credit score and repayment capability of an applicant. With the details on three basic elements of a loan - interest rate, tenure and loan amount, the function of the EMI calculator becomes easy.

The calculator computes the installment based on these three variables. The installments also combine a portion of interest besides principal to be paid to ICICI Bank every month. So, the calculator also shows the interest you would end up paying to the Mumbai-headquartered private lender.

How to Reduce Interest Outgo with EMI Calculator?

While one mostly focus to reduce the amount of EMI, there are few wise men devising strategies to cut down the outflow of interest from their pocket. Many of you may go for a long tenure just to cut the size of EMI amount. But, have you thought that a large chunk of your EMI will go in servicing the interest with such a tenure? No! Think about it before taking this all-important call of choosing a tenure. The tenure must be relatively shorter, helping one accommodate the hike in EMI with such a move. There’s no fun in paying more. So, if you were thinking of a 20-year loan, cut it to 15 years so that the EMI can be adjusted to your budget while saving a considerably large amount of interest from your end.

Kavya Jain, is a financial writer who has written on various financial products.She believes in delivering best of her knowledge so as to help the readers understand the product and be aware of their financial decisions.