Down Payment Calculator

Buying a house and buying a car—still today—are a huge step forward for individuals and families in India. And with such a step, the need to consider financial decisions becomes all the more important. In most cases, one approaches an institutional lender, such as a bank or financer, to borrow money for their purchase. Borrowing money comes with a number of different terms, such as down payments, borrowing periods, interest rates, and more, it need not be complex.  

Down payment calculators online help you understand the amounts that go into the initial down payment and the monthly equated monthly installments (EMIs). This helps in improving your financial planning. Continue reading to learn more about loan calculators with down payment and how they work.  

What is a Down Payment? 

When you make a big purchase partly financed by credit, there is an initial amount you pay out of pocket. This amount is not borrowed and represents a percentage of the total purchase price.  

The down payment reduces overall interest costs, reducing EMIs significantly. Even if it is not mandatorily a part of loan terms, it is better to make some down payment. Therefore, it is recommended to make at least 15-20 % of the purchase price as a down payment, especially on a housing or car loan.  

However, it is also crucial not to make a big down payment, as it might lock your funds, reducing liquidity. A big down payment may also cut into emergency fund, which could seriously impact your lifestyle.  

Therefore, choosing the right amount of down payment is essential to optimize the benefit of making one.  

What is the Down Payment Calculator? 

A down payment calculator is an instrument that asks for inputs such as the total cost of the asset you are purchasing, interest rate, processing fee, etc. There are formulas built into the calculator for EMI and down payment calculation.  

It uses the information you enter to calculate the optimal down payment and the monthly EMI you would have to pay for a specific term.  

You can look for an EMI calculator with a down payment online to avoid complex calculations.  

How Does Down Payment Calculator Work? 

A down payment calculator usually takes the following inputs:  

• Total asset cost 
• Interest rate  
• Processing fee 
• Tenure of loan  

Let us say you are buying a house worth ₹1,00,00,000/- and choose to make a down payment of 20% = ₹20,00,000. In this case, the loan amount will be ₹ 1,00,00,000 - ₹20,00,000 = ₹ 80,00,000. Let’s say the interest rate is 10% p.a for 25 years.  

In this case, if the processing fee is 1% of the loan amount, the down payment calculator will show a total upfront payment amount = ₹ 20,00,000 + 1% of ₹ 80,000,000 = ₹20,80,000/-. 

 
Further, it will also show EMI depending on the loan term entered by you.  

 
EMI amount = [P x R x (1+R)^ N]/[(1+R)^N-1] 

where 
P = Principal loan amount, in this case, is ₹80,00,000 

R = Rate of Interest, in this case, 0.1/12 per month 

N = Term of the loan is 25 years x 12 months = 300 months 

Using the above formula, the down payment and EMI calculator will show your EMI to be ₹ 72,696.05/-.  

How to use a Down Payment Calculator? 

There are various down payment calculators online that can be used to calculate down payment and the EMI amount. In most cases: 

• First have to enter the total cost of the asset you want to purchase 
• Next, enter the percentage of the purchase price you want to pay as a down payment. 
• Now, enter the interest rate and processing fee as a percentage of the principal amount. 
• Finally, select the loan term. 
• Once you have entered the above inputs, the calculator will show the upfront amount you should pay, including the down payment and the processing fee. It also shows the monthly EMI you should pay for the loan.  
• You can change the down payment amounts to see the impact on EMI payments.  
• Similarly, you can compare the EMI amounts by varying the loan term and the down payment.  
• You can find a mobile down payment calculator to calculate the EMI and down payments without the hassle of opening a laptop/desktop.  

Formula for Down Payment Calculator 

A down payment calculator usually uses 2 formulae 

1. Upfront payment = down payment + processing fee 

       The processing fee = (Asset purchase price - down payment)X processing fee as a percentage 

2. Monthly EMI = [P x R x (1+R)^ N]/[(1+R)^N-1] 

       where  

       P = Principal loan amount  

       R = Rate of Interest  

       N = Term of the loan  

Benefits of Down Payment Calculator 

A down payment calculator helps to: 

• Calculate the down payment that needs to be made on a specific purchase price  
• Calculate the processing fee on a loan 
• Calculate the monthly EMI on a loan 
• Facilitates you to evaluate various loan terms and choose the optimal one for the use case  
• There are various available online which can also be used on a down payment calculator for mobile for convenience and comfort.  

Conclusion 

A down payment calculator is essential for anyone considering a significant purchase. It not only helps determine the ideal down payment amount but also enables you to evaluate the advantages of buying down interest rates. By utilizing the insights provided by the down payment and mortgage calculator, you can make well-informed decisions that align with your financial goals. Whether you purchase a property or a vehicle, these tools provide the clarity needed to navigate the complex world of loans and payments.