13 AUGUST, 2019

A home loan comes with a repayment tenure that mostly lasts for several years. The feeling of having a financial liability as huge as a home loan is understandably stressful for many people. If planned properly, the home loan will not impede the entire annual budget of the borrower, including unforeseen financial emergencies.
Here's how you can ease out of this loan repayment stress when you opt for pre-payment or part-payment of your home loan.
In the case of home loans, the borrower can reduce the impact of the home loan interest rate by making pre-payments or part-payments. The option of pre-payment and part-payment enable the borrower to settle the loan before its tenure.

Full pre-payment

Just like the name states, full pre-payments involve paying off entire home loan amount before time during the early period of tenure.

Part-payments

Sometimes, the borrower receives an influx of money via profit in business or salary bonuses and so on. In such scenarios, the borrower can take this opportunity to pay off the home loan in parts. Partial payments on the home loan bring down the principal amount along with reducing the EMIs and total interest on it.

Why is the pre-payment of home loan beneficial?
Pre-payment of the home loan means paying off the amount of loan over and above regular EMIs ahead of time. Either full pre-payment or part-payments, many borrowers prefer to pre-pay the loan to reduce the substantial financial burden on them.
Pre-paying the loan decreases the outstanding principal amount, which in turn reduce the EMIs. Borrowers can take help of self-planning tools like home loan EMI calculator to check the EMIs on their home loan. Overall, home loan pre-payment is financially favourable to the borrower. Not to mention the reduced stress, bringing you peace of mind and being able to begin planning for your next goal.

Effect on credit score
Part-payment of the home loan does not affect the credit rating of the borrower at all. But, they do reduce the financial burden, which eventually leads to the borrower paying the home loan within the decided time.
On the other hand, home loan pre-payment does not immediately influence the credit rating of the individual. However, by pre-paying, the long-time effect on credit score is delightful as closing a loan account before the end of a tenure period, boosts the credit score of the individual. 

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.

Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.