About Central Bank of India
Central Bank of India, India's first genuinely Swadeshi bank, was set up in 1911 by a visionary by the name of Sir Sorabji Pochkhanawala. It has retained its Indianness right since the time of its establishment. The bank has a fantastic reputation for being a trustworthy institution. It was one of the first banks in India to be nationalised on July 19, 1969. Today, the bank has more than 4000 branches situated in every nook and corner of the country.
The bank offers a beautiful bouquet of loan and deposit services to its clientele. The Central Bank Home Loan is one of the most popular loan products for various reasons. One of them is the desirable rates of interest that are amongst the lowest in the country. The bank has multiple Home Loan products to suit the needs of every section of society. Among the services that the bank offers, the Home Loan EMI Calculator is an attraction. This calculator is a unique one because it serves as a Home Loan eligibility calculator, as well.
Central Bank of India - Home Loan Interest Rates
Central Bank of India is among the first banks in India to adopt the repo rate linked interest rate structure for all retail schemes. With effect from October 01, 2019, the bank offers RLLR-linked Home Loan interest rates to its new clients. This rate depends on the credit rating of the borrower. At present, the Home Loan rates range between 8.25% to 8.55%.
Central Bank of India Home Loan - Repayment Modes
Central Bank of India calculates Home Loan interest on the daily reducing balance method. This method is the most beneficial one to borrowers, as it offers the benefit of interest the moment you deposit the loan instalment into the account. The ideal mode of repayment to get the maximum out of such an interest calculation method is the EMI mode.
Central Bank of India - Home Loan EMI Calculator
Central Bank of India offers a unique Home Loan Calculator that is different from what the other banks have on their website. This calculator is a two way calculator that can help customers calculate their Home Loan EMI and their eligibility, as well.
Using the calculator is easy. The customer has to visit the official website of the Central Bank of India and select the loan calculator module.
- Select the loan bracket - Either up to 1 Crore or between 1 Crore and 10 Crores
- Choose the loan type - There are four options including the Home Loan
- If you are looking for your EMI calculation, you have to enter the loan amount, the tenure, and the interest rate.
- Click on the 'Monthly Amount' option to get the EMI in an instant
- If you are looking for the 'Loan amount,' you have to skip this step and provide details of the loan tenure, interest rate, and the EMI you can afford to pay.
- Click on the 'Loan Amount' option to arrive at the maximum affordable loan amount
This example will clear the matter:
Calculation of EMI
- Loan Bracket - Up to 1 Crore
- Loan Type - Home Loan
- Loan Amount - 25 Lakhs
- of instalments - 120
- Rate of Interest - 8.50%
- Monthly Payment (EMI) - Hit the Monthly Amount to get 30,996 as your EMI
- Loan Bracket - Up to 1 Crore
- Loan Type - Home Loan
- of Instalments - 120
- Rate of Interest - 8.50%
- Monthly Payment - 25,000
- Loan Amount - Click on the 'Loan Amount' to get the affordable loan amount as 20,16,362
Central Bank of India - Home Loan EMI Calculator Advantages
- Know your probable EMI in advance before applying for the Home Loan
- It helps to plan your budgets better if you are aware of your impending obligations
- This calculator helps to calculate your loan affordability
- Enter the maximum amount of EMI that you can afford to pay and get the loan amount that would fit your budget.
Central Bank of India - Home Loan EMI Calculator Alternatives
Considering the drawbacks present in the Central Bank of India EMI Calculator, one should look at alternate means of determining their Home Loan EMI.
MyMoneyMantra presents one of the best alternatives for calculating the Home Loan EMI.
- Access the MyMoneyMantra website
- Choose 'Financial Tools'
- Select EMI Calculator
- Enter the Home Loan amount
- Enter the rate of interest applicable to the Home Loan
- Provide information about the loan repayment tenure
- Click on the 'Calculate' option to get your Home Loan EMI
- Apart from the EMI amount, you also get the interest breakup for the whole Home Loan tenure. You can calculate the total amount you would have to pay on loan.
Calculating the Home Loan EMI using the traditional methods is a challenge today. It explains the popularity of the Home Loan EMI Calculators that are available all over the internet. However, we shall touch upon the formula for calculating the Home Loan EMI manually.
EMI = [PR(1+R)^N] / [(1+R)^N-1]
Where P refers to the loan amount, R represents the rate of interest and N denotes the number of monthly instalments.
Using MS Excel Formulas
MS Excel presents a smooth EMI calculation formula that many people are comfortable with.
EMI = PMT(rate, nper, pv)
- PMT - MS Excel function to denote EMI
- Rate - Rate of interest monthly (8.50% translates into 8.50 X 1/1200)
- NPER - No of monthly instalments
- PV - Loan amount, also known as Present Value
Factors That Determine the Central Bank of India Home Loan EMI Calculator
EMI Calculators require the furnishing of the following three variables.
- The Home Loan amount - Direct proportion
- The rate of interest - Direct proportion
- The loan tenure - Indirect proportion
|Rate of interest = 8.25%||Rate of interest = 8.55%|
|10 Lakhs||25 Lakhs||10 Lakhs||25 Lakhs|
Points to note
- As the loan amount increases from 10 Lakhs to 25 Lakhs, the EMI increases from 20,541 to 51,352 @ 8.55% for 60 months.
- The EMI for 10 Lakhs @ 8.25% for 240 months is 8,521. It increases to 8,710 when the rate of interest moves up to 8.55%.
- The EMI for 25 Lakhs @ 8.25% for 60 months is 50,991. It reduces to 19,711 as the tenure goes up to 300 months.
Factors That Affect the EMI
Rate of interest: Central Bank of India has started providing Home Loans linked to the repo rates. As and when the repo rates change, the bank will now have to revise the Home Loan interest rates accordingly. The rate of interest is a crucial variable in the EMI calculation. Hence, any change in the rate of interest will have a corresponding change in the EMI. If the rates go up, so too will the EMI, and vice versa.
PMAY subsidy: Central Bank of India has a nationwide presence. Hence, it is one of the foremost lenders under PMAY. All PMAY beneficiaries are eligible for support from the Government in the form of an upfront interest subsidy. This grant is credited to the loan account upfront. As it results in the reduction of the Home Loan principal, another critical aspect of the EMI, the EMI will reduce considerably.
Part prepayment: Central Bank of India permits part prepayment of Home Loans. Under such circumstances, the principal portion of the Home Loan reduces considerably. Therefore, the customer can request for reducing the EMI for the residual tenure. The bank caters to such applications on merits and reduces the EMI wherever necessary.
Default in payment: Any default in payment attracts penal interest. This penal interest has to be serviced by the borrower separately. If he/she does not do so but continue with the regular EMI, the interest component goes up considerably, necessitating a change in the EMI.
Moratorium: Central Bank of India approves moratorium up to 18 months on Home Loans availed for construction purposes. The bank disburses the loan amount in several tranches. Borrowers have the option of allowing the interest portion to accumulate and service it along with the regular EMI. Under such circumstances, the EMI will increase because of the accumulation of pre-EMI interest into the loan account. Alternatively, the borrower can service the pre-EMI interest monthly to reduce the EMI burden at a later stage.
Central Bank of India Home Loan EMI - Income Tax Benefits
Income Tax benefits are available under the IT Act for repayment of Home Loan. The Home Loan EMI comprises of two variable components, the interest and the principal repayment. The payment of both these components entitles the borrower to receive income tax benefits.
Sec 24 of the Act provides IT benefits up to 2 Lakhs on the repayment of the interest on the Home Loan. Sec 80C of the Act entitles the individual to avail benefits up to 1.50 Lakhs on the repayment of the principal portion of the Home Loan.
Central Bank of India - Home Loan EMI Calculator - FAQs
Does the Central Bank of India Home Loan EMI Calculator provide accurate results?
It depends on the user. If the customer provides factual data, the calculator gives accurate results.
How is the Central Bank of India Home Loan EMI Calculator different from that of the others available on the internet?
The Central Bank of India - Home Loan EMI Calculator, is different because it provides the facility to determine the Home Loan affordability. The other EMI Calculators do not offer this facility.
How does this function of Home Loan affordability work?
The EMI Calculator depends on three variables, the loan amount, the rate of interest, and the loan tenure. The Central Bank of India Home Loan Calculator allows you to keep the loan amount blank and enter the affordable EMI instead. Hence, it does a reverse calculation to determine the maximum loan eligible for a specific affordable EMI.
What is the Pre-EMI interest concept?
Loans sanctioned for construction of houses have a moratorium period up to 18 months. The disbursement takes place in tranches. However, the interest keeps accumulating. The regular EMI commences one month after the final disbursement. The interest that accrues to the account before the commencement of the regular EMI is the Pre-EMI interest.
How does the Central Bank of India treat the Pre-EMI interest component?
There are two ways of dealing with Pre-EMI interest. One is to allow the interest to accumulate into the principal loan amount. The EMI calculation will include the principal loan amount and the accrued pre-EMI interest. Alternatively, the borrowers can repay the pre-EMI interest every month. Under such circumstances, the regular EMI will not change.
How does the Central Bank of India treat the Home Loan repayment in the event of interest rate fluctuations?
Central Bank of India links its Home Loan interest rate to the repo rate. Therefore, any change in the repo rate brings about a corresponding change in the Home Loan interest rate. If there is an upward movement in the repo rate, the Home Loan interest rate goes up. The rate of interest is a vital constituent of the EMI calculation. Hence, the EMI should go up, as well. However, the Central Bank of India prefers to maintain the EMI constant and extend the loan tenure. The same is the case vice versa when the rates go down.
Can the borrower request the bank to alter the EMI instead of the tenure? Is it beneficial for the borrower to do so?
Yes, the borrower can request the bank to keep the tenure constant and increase or decrease the EMI accordingly. If the rates go down, it is not beneficial for the borrower to reduce the EMI. They are better off by maintaining the EMI constant. However, if the rates go up, the borrower benefits by increasing the EMI.
In the case of part prepayment, is it beneficial to the customer to ask for a change in the EMI?
The purpose of making a part prepayment is generally to get rid of the loan liability as soon as possible. Therefore, customers usually do not ask for a reduction in the EMI amount. However, there can be circumstances where the borrower might have to request the bank to reduce the EMI. The borrower might have pooled in their retirement benefits and made the part prepayment. As the borrower will have a reduced income in the form of a pension, they are justified in requesting the bank to reduce the EMI. The bank treats such case on merits and accedes to the customer's requests.
How does the bank calculate the EMI in the case of a semi-fixed rate of interest Home Loan?
The semi-fixed rate of interest Home Loans is a rarity nowadays. These loans have variable rates of interest. It remains fixed for a specific period after which it converts to a floating rate of interest. The bank now has to calculate the EMI two times. Initially, it does so for the fixed-rate period at the time of the sanctioning of the loan. Subsequently, the bank revises the rate of interest at the time of switchover to the floating rate. It has to calculate the EMI again at the prevailing floating rate on the day.