Tips for Managing your Home Loan EMI - Home Loan Blog - Tata Capital

Tips to Repay Home Loan EMIs

Mar 08, 2017

The best thing about property loan is that helps you realize your dream of owning a house. But having to pay a major chunk of your monthly income towards EMI for 10-15 years is mentally challenging for most people. But since house is a basic need and availing housing finance the most viable option to fulfill that need; people continue paying EMIs in spite of frustration associated with it.

But there are few ways that can help you manage your home loans better. Let us briefly look at them.

It is best to pay a slightly higher EMI than what is required by the bank. So if you are required to pay Rs 20,000 every month, make it a point to pay Rs 22,000 or more. It might seem odd to pay more than what is required every month as per your home loan eligibility. But even a small amount like Rs 2000 will go towards the repayment of principal amount. As your principal comes down, so does your interest amount and you will actually be able to pay off your loan earlier than your original tenure. You can easily use home loan emi calculators available online to understand the impact of increasing your EMIs on loan tenures.

Now every now and then, you might be getting lumpsum amounts from various sources like salary bonuses, maturing deposits/policies, windfalls from stock sale, etc. It's in your best interest to use this money to prepay your loans and lower your tenure. This will substantially reduce the total interest outgo. Banks also allow prepayment of home loans and generally do not levy additional charges.

Banks change base rates as and when RBI increases or decreases policy rates. EMIs too tend to change with change in lending rates. So when there are banks offering home loans at rates lower than what you are paying with your current bank, make use of the opportunity to switch loan to a bank that has a lower rate. This will mean that you will pay a lower total interest amount and also help reduce loan tenure. But do keep in mind that loan transfer charges should also be accounted for while calculating benefits of transferring home loans.

As you can see from above discussion, you can save a lot of money while servicing your home loans by making some sensible money moves. So make sure you keep these tips in mind while repaying your loans.