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17 MAY, 2021
No matter how comfortable your EMI is, a home loan is a liability you surely want to get rid of as soon as possible. After all, it can take away a significant part of your income every month. However, closing a loan early can be a difficult task to do. Thankfully, some tricks can help you pay off the home loan faster.
Continue reading to know more.
To repay the loan sooner, you can try paying higher EMIs. It would not only reduce your tenure but also help you cut down the overall interest payout for the loan. You can increase the EMI amount as per the subsequent hikes in your income. Even an increase of a small amount can help you repay the loan faster. However, before you decide to pay a higher EMI, assess your repayment capacity and ensure that the change suits your budget.
If you have surplus funds in hand, go for partial prepayments. A prepayment not only reduces your outstanding loan, but also the overall interest payout. You can use monetary gifts, incentives or bonuses to make prepayments. While there are no prepayment charges on floating rate home loans, you might need to check with the lender for prepayment charges if you have availed a fixed rate home loan.
If you want to repay the loan faster, opt for a shorter tenure. But, keep in mind that the loan tenure is inversely proportional to EMIs. If the loan tenure is short, you would have to pay higher EMIs and vice versa. So, you must weigh your financial capability and comfort before opting for a short tenure.
Even a slight reduction in the interest rates can make a significant impact on your home loan. So, if you find another lender offering a lower interest rate during your home loan tenure, you can opt for a balance transfer. Through balance transfer, you can transfer the outstanding loan to another lender and avail the benefit of lower interest rates. It would help you reduce the interest payout and thus your total repayment amount. However, ensure that balance transfer does not increase your cost of borrowing. The loan transfer should not have a high processing fee or other charges. Also, check if the new lender is offering top-up home loans, that can be handy if you need any financial assistance in the future.
Repaying a loan faster could be a gradual process where you need to divert all your extra money towards repaying the loan. However, you should avoid using the emergency fund to do so. All you need to do is manage your finances well and avoid being spendthrift while servicing a home loan.
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