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A Home Loan is a long-term commitment that can extend up to 30 Years based on the lender’s terms and conditions. To get the best out of it, it is necessary to meticulously plan your home finance journey in terms of repayment and financial management. It is always a good idea to plan your repayment feasibly and become debt-free.
So, if you have recently applied for a housing loan or are planning to apply soon, here are some tips to effectively repay Home Loan faster without compromising your finances.
Follow These 6 Useful Tips to Repay Home Loan Faster
As mentioned earlier, Home Loans are a long-term commitment. This means more than anything else, you require a certain level of financial discipline and a steadily increasing source of income to make the repayment journey smooth, quick and rewarding. Here are a few tips to close Home Loan early and reduce your debt burden.
Choose a Lender Offering Low Interest Rates
It is important to carefully study the market before taking out a Home Loan. Review the offerings by various lenders to know about their interest rates and other benefits. After checking all the lenders, pick a lender that offers the best loan terms, such as a low interest rate, flexible repayment tenor, and easy-to-meet eligibility criteria. A low Home Loan interest rate translates into affordable EMIs, which can ease your repayment journey.
Additional Read: Tips for Securing a Better Interest Rate on Home Loan
Choose a Lender that Allows Frequent Payments
Before you zero in on your Home Loan lender, ensure that the lender allows frequent payments above your EMIs. Making part-prepayments on your home finance will reduce the interest accumulation. Also, consequently, you can repay your loan faster.
Borrow a Home Loan Amount That is Easy to Repay
Understand your financial capacity before taking a Home Loan. Exceeding the loan amount beyond your financial capacity can severely strain your monthly expense. If you choose a Home Loan amount that suits your budget, your repayment process will become easier. Getting a realistic idea of your repayment capacity is, hence, necessary.
Select a Short Home Loan Tenor
One of the best ways to repay a Home Loan faster is by selecting a short Home Loan tenor. Although you pay a relatively high EMI with a short tenor, your interest outflow is limited. Apart from being able to settle your debt in a short duration, it also boosts your credit score and allows you to borrow other loans when the need arises.
Additional Read: How to Pick the Best Home Loan Tenor that Suits Your Budget
Make a Sizeable Down Payment
Save enough money to make a sizeable down payment. Making a down payment instantly lowers your principal amount and significantly reduces your debt. Ensure that you’ve accounted for the down payment when you plan your home buying finances.
Opt for a Balance Transfer
In case you feel that your existing lender’s Home Loan terms are no longer favourable, consider opting for a Home Loan Balance Transfer and switching to a new lender. Switching lenders will enable you to benefit from a lower interest rate and a reduced tenor, basis eligibility. With such favourable terms, you can easily pay off your Home Loan faster.
Additional Read: All About Home Loan Balance Transfers
Apart from the above-mentioned tips, here are some more suggestions to close your Home Loan quickly.
- Utilise profits from your other investments to quickly pay off your Home Loan
- Avoid taking other loans as the financial stress may be too heavy on you
- Build a systematic investment plan to easily clear your Home Loan
You can close your Home Loan faster and make yourself debt-free sooner if you follow these steps diligently. The faster you repay your loan, the more secure you feel realising that all your money would be used to achieve your other life goals without having to share it with EMIs. Wishing you a rewarding and fulfilling financial journey.
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Frequently Ask Questions
Buying a home is a dream for many. While it builds an asset, a major chunk of your money in the form of EMIs can financially affect you. As it involves a significant financial task, one of the strategic ways to save money is to repay a Home Loan faster or earlier. You may choose to repay partially or the entire loan amount depending on your financial obligation. Repaying a Home Loan faster helps reduce the total interest charges. It makes you debt-free early. It also helps you pay principal amount faster.
Prepaying Home Loan can potentially help you save interest rate. Opting for a shorter tenor also reduces your interest rate. A shorter tenor helps you repay the principal amount faster. As interest is basically calculated on outstanding principal component, quick payment of principle amount results in lower interest payout. Also, if possible, try to pay surplus EMI amount, as it will potentially unburden your interest rate and principal outstanding. Doing a thorough research in terms of low interest offerings before availing of a Home Loan is advisable.
Prepaying Home Loan can potentially help you save interest rate. Opting for a shorter tenor also reduces you interest rate.
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