No one wants a loan hanging on their head forever. Infact, even when loan tenure is not very long compared to other loans, people still want to get over with it.

But, how to do it smartly without straining your finances?

There is a simple way to do it.

And that is to pay a little extra every month (in form of extra EMI). This can reduce your loan tenure substantially.

Let’s take a simple example to prove it to you.

Suppose your monthly income is Rs 1 lac. You want to take a Rs 30 lac loan to purchase a house. Your tenure for the loan is 20 years and rate is 9.5%.

Now the EMI for this loan is Rs 27,964.

You are happy to see the EMI amount, as it will not hurt you much given your monthly income Rs 1 lac.

But let’s see what happens if you are ready to increase your EMI by just a few thousand rupees?

  • If you pay Rs 29,037, your loan tenure will be 18 years.
  • If you pay Rs 30,450, your loan tenure will be 16 years.
  • If you pay Rs 32,351, your loan tenure will be 14 years.

So as you can see, by paying just a couple of thousand more (which won’t hurt you as your income is large enough), you can reduce your loan tenure substantially.

And that is not all. You also save about Rs 12 lacs on lower interest during this period reduction from 20 years to 14 years.

That is not a bad deal for just a few thousand extra every month. Isn’t it?

So remember this neat trick while applying for your home loan. Irrespective of how much your lender tries to convince you about opting for a longer tenure, make sure you chose shorter one if your income is large enough.


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