Do you want to minimise your financial stress? Then, repay your home loan as quickly as you can!
While a housing loan enables you to purchase your dream house conveniently, it is also a substantial financial commitment. So, it is crucial to manage your repayment and make informed decisions as you pay off your EMI. By paying off your loan smartly, you will:
- save massively on your interest outgo.
- become debt-free sooner.
- improve your credit score.
Here are five ways you can repay your loan quickly.
#1 Make the maximum down payment
If you have the financial means, pay the maximum down payment amount that your lender’s terms allow. By doing so, you will significantly lower your principal loan amount. As a result, your net interest and EMI value will reduce.
Experts recommend putting down a down payment of 20% to 25%. If you have any stagnant investments that are not generating expected returns, consider liquidating them and using the money as a down payment.
#2 Look for lower interest rates
Today, you have plenty of home financing options. However, don’t rush to make a deal with the first lender you find! Research and compare different lenders and find a suitable one that offers you competitive interest rates. The lower your interest rates, the smaller your EMIs, and the sooner you can close the loan.
If you are already repaying a home loan at a higher interest rate, you can consider a balance transfer with a lender offering lower rates.
#3 Consider the additional charges
Before choosing a lender, consider processing fees, late payment charges, and other hidden costs, as they can make a considerable difference in your overall repayment.
Once you learn about the additional charges, avoid paying the conditional ones. For example, by paying your EMIs timely, you can steer clear of late payment charges.
#4 Increase your EMI
If your income has increased after taking the loan, you can request your lender to increase your EMI amount by shortening your tenure.
This is an effective way to get debt-free faster because even a slight increase in your EMI can significantly reduce your loan tenure. Use a home loan EMI calculator to plan your new EMIs and see how many years you can take off from your tenure.
#5 Make partial pre-payments
Making partial pre-payments helps you lower your future EMIs and allows you to repay the loan within a shorter duration.
Your lender’s pre-payment terms and conditions are important to consider here. Some lenders do not charge for a certain number of partial pre-payments! So, do your research. If you find that the total pre-payment charges will be lower than your overall interest outgo, you can choose this option.
Follow the tips given above for a smooth loan repayment experience, lower your EMI burden, and become debt-free sooner!
Tata Capital is here for you if you want to switch lenders for more competitive loan terms. We offer affordable interest rates and flexible EMI options. Visit our website to learn more and check your home loan eligibility.