Loans can work as a blessing in our times of need. Loans such as a home loan can not only finance your home but also increase your purchasing power to buy a better one. However, loan repayment can turn out to be a stressful aspect if you don’t take care of finances effectively.
Moreover, some people may take another loan while repaying a pending one. Although there is nothing wrong with taking two loans, you must consider their affordability, your income and expenditure to ensure you can repay them conveniently.
Are you repaying a home and personal loan simultaneously? Then, keep reading to learn about how to prioritise your home loan vs personal loan repaymentcommitments.
Factors determining the urgency of repayment
Often, when people have more than one loan, they continue to repay them equally by allocating a steady supply of their income towards EMIs. However, this can harm your savings in the long run.
Here are some things to consider when deciding your home loan vs personal loan EMI payments:
- Total EMI amount
- Is the interest ratehigher than the personal loan rate?
- Loan tenure
In any case, you can always use a home loan EMI calculator to accurately determine the EMI burden of the two loans. And choose which one to repay first.
Which loan should you repay first?
You can decide which loan to repay first by considering the factors given below.
As opposed to personal loans, a loan for house purchase comes with tax benefits. You can claim up to Rs. 2 lakhs paid on theinterest for the entire loan tenure. This can significantly reduce your tax burden and help you save money, making the loan repayment relatively affordable.
Additional Read: Everything You Need to Know About Tax Benefit on Home Loans
Cost of loan
Generally, people prefer to pay off the loan with a high value of borrowing. But it is more beneficial to repay the high-cost loan first. This means you should repay the loan with a higher interest and longer tenure first and get free from the burden. After that, you can easily manage to repay the loan with a more affordable home loan interest rate.
You can choose to prepay a loan and close it earlier, but this comes at a cost. You need to pay the penalty on prepayment, so make the decision wisely. Some lenders do not provide a prepayment facility at all. Thus, you should clarify whether this facility is available or not beforehand.
Additional Read: Top Things to keep in mind before prepaying your Home Loan
And that’s it! You now have a complete picture of the repayment of two loans at once. If you want to finance your house purchase, leverage Tata Capital’s easy-to-fulfil home loan eligibility and obtain a loan of up to Rs. 5 crores.
In addition, we provide a flexible tenure of up to 30 years, depending on your convenience, and some of the most competitive interest rates. For more information, visit our website today!