How to repay a home loan faster?

Owning a house is a great pride in itself. However, a big portion of the salary going to the bank every month may not be a pleasant feeling for any household. A Home loan allows you to live in a house registered in your name, but is that house really yours? All you own is a nameplate hanging outside the main door and photocopies of the sale deed and registration slips. Needless to mention the mental strain associated with the massive EMIs. Typically, people take a home loan for a period of 10 to 15 years. Sometimes, to lower the EMI, people increase the loan tenure up to 20 – 30 years. However, as these long years pass by, so does your youth. Therefore, the sooner you pay off your home loan, the sooner you have a roof of your own in the true sense.

This blog post helps you learn how to clear a home loan faster and live debt-free in your dream home. 

Make partial payment whenever possible

Until the last few years, this option was almost avoidable, as you would have ended up paying a huge penalty for prepayment of your loan amount. But now it is possible with the RBI’s monetary policy announcement in June 2012, which directed banks and other financial institutions to waive any sort of penalty associated with the prepayment of loans. 

Thus, you should keep depositing funds in your home loan account in addition to the monthly EMIs. Extra money can come in the form of a festival bonus, arrears, incentives, a gift from relatives on special occasions, the maturity of existing deposits, etc. So, instead of renovating your house or buying a new phone or furniture, invest that money towards repaying your home loan account. Initially, this idea might seem troublesome to you, but it will help you save more in the long run.

Reduce the tenure and not EMI

After partial payment, the bank will give you the option of either reducing the EMI or the loan tenure. It is not advisable to reduce the EMI, as one should aim to finish the loan as soon as possible. If you want to know how to close a home loan early, keep the EMIs as they are, and you will pay off the loan faster.

Switch to the bank that offers a lower interest rate than yours

You should be aware of the latest market trends and home loan interest rates. There may be a bank that is offering a significantly lower interest rate than your current lender. Transfer your home loan to that bank after carefully going through their terms and conditions. However, it should be noted that you will again have to pay the processing fee of the new lender. So, your decision should be well researched and carefully thought out.

Take a look at your savings

আপনার সমস্ত সেভিংস এবং বিনিয়োগ সম্পর্কে চিন্তা করার সময় এসেছে. PPF, EPF, পোস্ট অফিস ডিপোজিট এবং কিছু ফিক্সড ডিপোজিটের মতো সেভিংস আপনার হোম লোনের চাহিদার চেয়ে বেশি সুদ দিতে পারে না. তাহলে, যখন আপনি অন্য কাউকে আরও সুদ প্রদান করছেন তখন এই ধরনের ডিপোজিট রাখার মানে কী? তবে, যে কোনও জরুরি অবস্থার জন্য আপনাকে সবসময় অতিরিক্ত পরিমাণ রাখতে হবে.

EMI কাঠামো পুনরায় কাজ করার কথা বিবেচনা করুন

এটি অসম্ভব মনে হতে পারে, কিন্তু আপনার EMI-এর সামান্য বৃদ্ধিও আপনাকে প্রত্যাশার চেয়ে শীঘ্রই আপনার লোনের পরিমাণ ক্লিয়ার করতে সাহায্য করতে পারে. যদি আপনি শুধুমাত্র আরও ₹1,000 যোগ করেন, তাহলে এটি আপনার মূল অ্যাকাউন্টে যাবে এবং আপনাকে আপনার লোনের পরিমাণ দ্রুত রিপে করতে সাহায্য করবে.

If you are determined to pay off your home loan faster, you can do it through the careful and planned execution of the above ideas. And don’t forget, you will be the real master of your house only when you have repaid your home loan.

Why is paying off your home loan early beneficial?

You’ve read the various ways on how to clear a home loan faster, but it’s also essential to understand the benefits of early home loan repayment. It can help save money and also enhance your overall financial freedom. 

Here are some reasons why you should pay off a home loan early. 

1. Lower interest outgo: Early repayment quickly reduces the principal, cutting down the total interest you would have paid over the loan’s entire tenure.
2. Faster debt freedom: If you repay your home loan faster, you become debt-free sooner. Thereafter, you can invest your funds, focus on personal goals, or enhance your savings.
3. Improved credit profile: Consistent pre-payments reflect strong financial discipline, helping you improve your credit score and future loan eligibility.
4. Reduced financial stress: With fewer financial obligations each month, the stress and burden on your pocket are reduced. 

Tips to track and manage your home loan efficiently

The following home loan management tips on how to repay a home loan faster are key to your loan repayment journey. 

• Use a loan tracking app: Most banks offer apps with loan tracking methods to monitor EMI due dates, outstanding balance, and interest components.
• Set EMI reminders or auto-debit: Automating payments prevents missed EMIs. It protects your credit score and ensures hassle-free repayment.
• Review your statement regularly: Check interest charges, principal reduction, and any unexpected fees to stay financially aware and manage a home loan efficiently.
• Plan part-prepayments annually: Use bonuses or savings to reduce the principal, helping shorten the tenure and cut interest costs.
• Monitor interest rate changes: Stay updated about market rates and consider a balance transfer if another lender offers significantly lower rates.

Common mistakes to avoid when repaying your home loan

Repaying a home loan requires careful planning. If you avoid loan repayment errors, you can save money, stay organized, and close your home loan faster.

• Don’t ignore pre-payment opportunities because using bonuses or savings can reduce your principal and interest burden. 
• Don’t choose a longer tenure, as it may lower EMIs but increase the total interest you pay. 
• Avoid forgetting to compare interest rates regularly so you don’t miss out on better refinancing options. 
• Don’t miss EMI deadlines because late payments can lead to penalties and negatively affect your credit score.
• Avoid overlooking your loan statements so you can catch errors or unnecessary charges on time.