Paying your home loan EMIs will always be a long-term commitment which could range from 10 to 30 years. Your financial situation could witness massive changes over these years. So, it’s always recommended that you retain flexibility when entering into a contract with your lender. You need to look at closing your loan as early as possible via prepayments; however, still rely on EMI paying options when selecting a lender. Let’s look at how you can finish your home loan EMIs faster:
1. Consider a down payment amount which is more than 20%
Your principal amount will reduce significantly depending on the down payment you make while taking a loan. For example, you can pay a minimum of 20% to 30% of the loan amount in advance via a down payment. Your debt obligation will dip instantly when your down payment amount is more; the amount you spend on the interest component and overall repayment will be lesser.
2. Initiate a few part-prepayments
When you make a few part-prepayments during your home loan tenure, the principal amount you owe and your subsequent EMIs will reduce. When your EMIs come down, you can pay them on time and clear your home loan within a shorter period.
3. Opt for a shorter home loan tenure
With a short tenure, you will pay the higher home loan EMIs; however, you will clear your loan faster. The interest amount you will end up paying also will be lower in comparison to what you would end up paying when you choose a longer tenure. When you clear your loan within a short duration, you will be able to borrow more funds again in case a need arises. This will also boost your credit score.
4. Choose a lender who levies low-interest rates
Make sure you analyse the market thoroughly before finalising a lender. Please review the details of all lenders and compare their interest rates accordingly. Opt for a lender offering the lowest interest rate to repay your loan quickly, and your loan EMIs are affordable. In case you are paying a high home loan interest already, look at initiating a home loan balance transfer so that you can avail lower interest rates and other kinds of benefits.
5. Do not default on your monthly EMIs
When you miss paying your EMI, it will impact you in several ways. The delay will attract 2% penal interest rate charges plus applicable taxes. Your CIBIL score will dip, your credit report will mention the payment you missed to pay. When your CIBIL score drops in the future, it may be difficult for you to avail credit. Your loan applications in the future may also get rejected when a lender performs a credit enquiry.
6. You can link your home loan to a bank account
While sanctioning a home loan, a current account will be opened in a few banks, and both will be linked. The amount you keep in this current account will decrease your interest burden. Your home loan’s interest liability will reduce to the extent of the surplus funds which you have kept in the current account.
You can deposit or withdraw funds from this current account whenever you want to. Interest on a home loan will be computed based on the outstanding loan amount minus the balance in the current account.
7. Home loan options with EMI waiver schemes
A few lenders render an incentive to you wherein a specific number of EMIs is waived off when you regularly pay your EMIs. You need to check the processing fee and other specific conditions to check if it aligns with the other lenders.
When you default on your home EMIs, your credit score will take a beating; thereby, your future borrowings could get difficult. Hence, you need to always look at ways to solve this crisis versus attempting to avoid it.
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Bhavana is a Senior Content Writer handling the GST vertical. She is committed, professional, and has a flair for writing. When away from work, she enjoys watching movies and playing with her son. One thing she can’t resist is SHOPPING! Her favourite quote is: “Luck is what happens when preparation meets opportunity”.