How do You Overcome Home Loan Repayment Burden?

Housing finance simplifies the task of funding the home of your dreams. Attractive interest rates and flexible tenors make it a popular credit solution for all your big-budget real estate purchases. However, when it comes to Home Loan repayments, you need to plan smartly. Or else, the EMIs may put undue pressure on your finances. If you wish to avail of a Home Loan or have already taken one, here are some effective tips that can reduce the loan burden. 

10 Proven Tips to Overcome Home Loan Burden Without Stressing Your Wallet

Missed or delayed EMIs can damage your credit score making it tougher to secure any future credit. Given below are some useful strategies that can reduce the loan burden In India:

1. Repay High-Interest Credit

   It is important to prioritise the repayment of your loans if you have multiple credit lines. Paying off the costliest loan first can lower the interest outgo. If not, pay the maximum amount you can afford without jeopardising the other loan EMIs.

2. Claim Tax Benefits

   Your Home Loan offers various tax benefits that lower borrowing costs. You are entitled to tax exemptions up to Rs. 1.5 lakh under Section 80 EEA of the Income Tax Act, while Section 80 C and Section 24 (b) extend further benefits of Rs. 1.5 lakh and Rs. 2 lakh respectively on the principal and interest components of your loan. Some of these provisions enable you to claim deductions every financial year resulting in substantial savings.  

3. Raise EMI Pay-Outs

   Before you apply for a Home Loan, it is imperative to estimate the payable EMIs using a Home Loan EMI Calculator to manage repayments comfortably. Thereafter, as you repay the loan, remember to increase the instalment amount corresponding to a raise in your income. Even a modest hike in EMI by Rs. 1000 annually allows you to save considerably on the interest outgo and close the loan earlier.  

   Also Read: Know How to Calculate Home Loan EMI 

4. Utilise Windfall Gains

   Financial windfalls such as salary bonuses, income tax refunds, matured insurance policies, bonds, etc. can be utilised to foreclose or prepay loans. Lenders do not levy prepayment charges to individual borrowers on floating-rate Home Loans but they may do so for fixed-rate Home Loans.  

5. Liquidate Investments

   A grim debt situation might compel you to liquidate the assets in your financial portfolio. For instance, you can borrow against your life insurance policy or your Provident Fund. Gold holdings and low-interest fixed deposits may be quickly liquidated but restrict your PPF withdrawals. It should ideally be left untouched for the future.

6. Consolidate the Debts

   A single loan is easier to monitor and brings down the debt burden. If you hold numerous loans at a time, combine them into one consolidated loan that may give you lower interest rates compared to the existing ones.

7. Refinance Your Home Loan

   Keep yourself updated with current market trends. If you see interest rates dropping or find a lender who agrees to extend better interest rates than your present lender, refinance Home Loan provided the associated charges justify the costs of a transfer. If the loan exceeds seven years of repayments, refinancing may not fetch you any financial gains. 

   People Also Read: Reasons to Opt for Home Loan Refinancing 

8. Initiate Lifestyle Changes

   You may need to cut down on unwanted expenses and regulate credit card usage to accommodate debt repayments. If necessary, reduce the card limit to curb excess spending and avoid taking further loans or fresh credit. You could even opt for auto debit options to eliminate any possibilities of missed EMIs.

9. Make a Hefty Down Payment

   Generally, borrowers need to bear 10% - 25% of the property’s value as down payment since lenders cannot finance the entire cost of a house. Making a heavier down payment that exceeds the minimum amount will reduce your Home Loan monthly instalments.

10. Co-Apply for a Home Loan

    Apply for a house loan with a co-applicant if the EMIs stretch your budget. The combined income will boost your repayment capacity. Further, in case of a female co-applicant, you can also enjoy lower interest rates as well as concessions in stamp duty and registration charges. 

Negotiate the Loan Terms with Your Lender

Lenders look for responsible credit behaviour in Home Loan applicants. A flawless credit history and a good CIBIL score of 750 or above may land you suitable loan deals at competitive interest rates. If you have a good relationship with the lender, you could revisit the service terms and obtain special offers aimed at existing customers.

Request the lender to restructure your current loan, which can grant you longer tenors and smaller EMIs for easy repayments. Sometimes, lenders may advise you to shift your loan from a floating interest rate to a fixed interest rate or vice versa. Consider the financial implications of both interest types before you effect a change. 

People Also Read: Differences Between Fixed and Floating Interest Rates 

To Conclude

Availing a Home Loan is easy but planning the repayments can be a challenge. Bear in mind the pointers mentioned here to manage the Home Loan burden effectively. If you still face problems with your debts, you may reach out to any of the active debt counselling centres like Credit Vidya, Credit Sudhaar and others. They help borrowers overcome their loan repayment troubles by offering credible financial advice for free or at nominal charges.