​How to Calculate Home Loan Interest Rate and Save Money (2024)

If borrowers want to calculate their Home Loan interest rate, they can make use of a Home Loan EMI Calculator, which can give them an accurate idea of their total cost of borrowing. ​

The Bajaj Housing Finance Home Loan starts from 8.50%* p.a. for eligible salaried applicants, which means that we charge 8.50%* p.a. of your principal loan amount, compounded monthly.

The important thing to note for Home Loan interest rate is that it is compounded interest and not simple interest. In other words, you don’t pay interest only on the principal amount, but you pay interest on the principal amount plus the interest accrued.

With compound interest, it is imperative to note the compounding frequency. For instance, a Housing Loan interest rate is compounded monthly, which means that the interest payable is for the principal amount as well as the interest accumulated monthly.

To summarise, your Home Loan interest rate determines the EMI payments you will need to make and how expensive your entire housing loan may be.

There are two ways you can calculate the interest you will likely pay on your Home Loan:

1. Interest Rate Calculation Formula: This calculation is based on the textbook interest rate formula. You can use this simple formula to calculate Home Loan interest:
   Interest = (Principal Amount x Rate of Interest x Time)/100.
   Here's an example to help you understand how the formula works:
   Let's say you borrowed Rs.3,00,000 for a Home Loan with an annual interest rate of 8.50%* for a period of 20 years. To manually calculate the interest on your Home Loan, you would use the formula as follows:
   Interest = (300,000 x 8.5 x 20)/100
   = 51,000,000/100
   = 510,000
   So, the total interest payable on your Home Loan over a period of 20 years would be Rs.510,000. By using this formula, you can calculate the interest on your Home Loan manually and get a clear idea of how much you'll be paying in interest over the loan term.
2. Online Home Loan Interest Calculation: With the easy availability of online tools such as the housing loan EMI calculator, your interest calculations can be made simpler. Here’s how:

• Use calculator slider to select your desired loan amount
• Use the next slider to select your ideal repayment tenor
• Use the last calculator slider to select the current interest rate

The calculator then displays your EMI calculation, your total repayment amount, and the principal and interest break-up. Through these calculations, you will be able to realistically assess how much the housing loan interest may cost you at the end of your repayment tenor.

Here is a ready table for your reference:

Before you complete your Home Loan application process, there are some tips you can employ to boost your chances of getting a competitive interest rate.

• Enhance your Credit Score
• Borrow a loan amount that you can repay comfortably
• Apply with a financial co-applicant to enhance your loan application

*Terms and conditions apply.