Once you have been sanctioned a home loan, the next step involves paying off your EMIs. While borrowers and lenders together decide on a fixed repayment tenure with fixed instalment amounts, there is no restriction of sticking to those prescriptions. You can optimise your EMIs by paying bigger amounts faster.

Let us look at some of the benefits of paying higher EMIs on your home loan.

Interest savings

This is the most important reason why one should pay higher EMIs as they have a direct impact on your loan’s interest amount. Paying a higher EMI reduces your loan tenure. If you opt to pay a lower EMI over an extended time period then you end up paying much more in interest and vice versa. An example will help us understand this better.

Shruti has been sanctioned a home loan for Rs. 40,00,000 @ 6.90% p.a.

EMI option 1 = Rs. 36,635

Loan Tenure = 20 years

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Total interest paid = Rs 47,92,322 

EMI option 2 = Rs 32,907

Loan Tenure = 30 years

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Total interest paid = 78,46,526

By availing option 2 Shruti will pay a lower EMI but will end up paying Rs 30.54 lakhs more towards interest payments.

Additional Read:- How is the Home Loan Industry Empowering Indians?

Improved credit score

Your credit score drastically improves if you repay your EMIs before the stipulated loan tenure. This also makes your profile trustworthy for future borrowings. By repaying your EMIs faster, you display incredible liquidity and stability of income to the financial institutions. A healthy credit score and loan history is monitored closely by all financial institutions and assumes a critical role when it comes to evaluating your financial soundness. 

Freedom from loan

Taking a loan is a common thing and so is taking the stress of paying it along the years. Paying higher EMIs will rid you of the loan faster and make you the true owner of your home. It will not just make you worry-free but will also provide your household financial stability. EMIs eat up a major chunk of your income, making you cringe before buying anything even remotely expensive. Many families go back to a more basic existence by cutting down on their lifestyle expenses while paying a mortgage on their dream home. Mustering up the courage to pay off your loan faster through higher EMIs will make you resume your preferred lifestyle faster.

Tax benefits

The Government of India provides income tax relief to people who have been sanctioned home loans, through Sections 24, 80C, 80EE and 80EEA of the ITA. These benefits can be availed towards both the principal as well as the interest component of your loan EMI. A tax benefit of up to Rs. 2,00,000 can be exhausted towards the interest payment, whereas a benefit of Rs. 1,50,000 can be exhausted towards the principal repayment. If you choose to pay a low EMI then you may not be fully able to exhaust these limits for tax benefits.

Additional Read:- Difference Between a Home Loan and a Plot Loan

Final Thoughts Buy your dream home by taking a home loan with Tata Capital and availing the home loan tax benefits. Log on to our website and use the home loan calculator to avail of our competitive home loan interest rates. EMI calculator for homeloan can help you figure out your home loan eligibility. Simply input your loan amount, rate of interest and tenure to use a home loan EMI calculator.

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