Get the Tata Capital App to apply for Loans & manage your account. Download Now

Blogs

SUPPORT

Menu  
 
Apply Now
Apply Now

Tata Capital > Blog > Loan for Home > How to repay a home loan faster?

Loan for Home

How to repay a home loan faster?

How to repay a home loan faster?

Owning a house is a great pride in itself. However, a big portion of the salary going to the bank every month may not be a pleasant feeling for any household. A Home loan allows you to live in a house registered in your name, but is that house really yours? All you own is a nameplate hanging outside the main door and photocopies of the sale deed and registration slips. Needless to mention the mental strain associated with the massive EMIs. Typically, people take a home loan for a period of 10 to 15 years. Sometimes, to lower the EMI, people increase the loan tenure up to 20 – 30 years. However, as these long years pass by, so does your youth. Therefore, the sooner you pay off your home loan, the sooner you have a roof of your own in the true sense.

This blog post helps you learn how to clear a home loan faster and live debt-free in your dream home. 

Make partial payment whenever possible

Until the last few years, this option was almost avoidable, as you would have ended up paying a huge penalty for prepayment of your loan amount. But now it is possible with the RBI’s monetary policy announcement in June 2012, which directed banks and other financial institutions to waive any sort of penalty associated with the prepayment of loans. 

Thus, you should keep depositing funds in your home loan account in addition to the monthly EMIs. Extra money can come in the form of a festival bonus, arrears, incentives, a gift from relatives on special occasions, the maturity of existing deposits, etc. So, instead of renovating your house or buying a new phone or furniture, invest that money towards repaying your home loan account. Initially, this idea might seem troublesome to you, but it will help you save more in the long run.

Reduce the tenure and not EMI

After partial payment, the bank will give you the option of either reducing the EMI or the loan tenure. It is not advisable to reduce the EMI, as one should aim to finish the loan as soon as possible. If you want to know how to close a home loan early, keep the EMIs as they are, and you will pay off the loan faster.

Switch to the bank that offers a lower interest rate than yours

You should be aware of the latest market trends and home loan interest rates. There may be a bank that is offering a significantly lower interest rate than your current lender. Transfer your home loan to that bank after carefully going through their terms and conditions. However, it should be noted that you will again have to pay the processing fee of the new lender. So, your decision should be well researched and carefully thought out.

Take a look at your savings

It’s time to ponder over all your savings and investments. Savings like PPF, EPF, post office deposits, and some fixed deposits might not give you more interest than what your home loan demands from you. Then, what is the point of keeping such deposits when you are paying more interest to someone else? However, you should always keep a surplus amount for any emergency.

Consider reworking the EMI structure

It may seem impossible, but even a slight increase in your EMI might help you clear your loan amount sooner than expected. If you simply add Rs. 1,000 more, it will go to your principal account and will help you repay your loan amount faster.

If you are determined to pay off your home loan faster, you can do it through the careful and planned execution of the above ideas. And don’t forget, you will be the real master of your house only when you have repaid your home loan.

Why is paying off your home loan early beneficial?

You’ve read the various ways on how to clear a home loan faster, but it’s also essential to understand the benefits of early home loan repayment. It can help save money and also enhance your overall financial freedom. 

Here are some reasons why you should pay off a home loan early. 

  1. Lower interest outgo: Early repayment quickly reduces the principal, cutting down the total interest you would have paid over the loan’s entire tenure.
  2. Faster debt freedom: If you repay your home loan faster, you become debt-free sooner. Thereafter, you can invest your funds, focus on personal goals, or enhance your savings.
  3. Improved credit profile: Consistent pre-payments reflect strong financial discipline, helping you improve your credit score and future loan eligibility.
  4. Reduced financial stress: With fewer financial obligations each month, the stress and burden on your pocket are reduced. 

Tips to track and manage your home loan efficiently

The following home loan management tips on how to repay a home loan faster are key to your loan repayment journey. 

  • Use a loan tracking app: Most banks offer apps with loan tracking methods to monitor EMI due dates, outstanding balance, and interest components.
  • Set EMI reminders or auto-debit: Automating payments prevents missed EMIs. It protects your credit score and ensures hassle-free repayment.
  • Review your statement regularly: Check interest charges, principal reduction, and any unexpected fees to stay financially aware and manage a home loan efficiently.
  • Plan part-prepayments annually: Use bonuses or savings to reduce the principal, helping shorten the tenure and cut interest costs.
  • Monitor interest rate changes: Stay updated about market rates and consider a balance transfer if another lender offers significantly lower rates.

Common mistakes to avoid when repaying your home loan

Repaying a home loan requires careful planning. If you avoid loan repayment errors, you can save money, stay organized, and close your home loan faster.

  • Don’t ignore pre-payment opportunities because using bonuses or savings can reduce your principal and interest burden. 
  • Don’t choose a longer tenure, as it may lower EMIs but increase the total interest you pay. 
  • Avoid forgetting to compare interest rates regularly so you don’t miss out on better refinancing options. 
  • Don’t miss EMI deadlines because late payments can lead to penalties and negatively affect your credit score.
  • Avoid overlooking your loan statements so you can catch errors or unnecessary charges on time.
Apply For Home Loan

Say Hello to Your New Home with Our Easy Home Loans!

Apply now
Popular Searches
PMAY Calculator Home Loan for Government Employee Home Loan for Self Employed Home Loan for Women Home Loan Balance Transfer with Top Up Area Calculator Stamp Duty Calculator Home Loan Top Up Approved Housing Projects in India 12 Lakh Home Loan 15 Lakh Home Loan 25 Lakh Home Loan 30 Lakh Home Loan 35 Lakh Home Loan 40 Lakh Home Loan 45 Lakh Home Loan 60 Lakh Home Loan 65 Lakh Home Loan 70 Lakh Home Loan 75 Lakh Home Loan 80 Lakh Home Loan 85 Lakh Home Loan 90 Lakh Home Loan 1.5 Crore Home Loan 2 Crore Home Loan 2.5 Crore Home Loan 3 Crore Home Loan 4 Crore Home Loan
More About Loans
home loan Home Extension Loan Affordable Housing Loan Pradhan Mantri Awas Yojana Home Construction Loan Home Loan Balance Transfer Documents Required for Home Loan Home Loan Interest Rates Home Loan EMI Calculator Home Loan Eligibility 10 Lakh Home Loan 50 Lakh Home Loan 30 Lakh Home Loan 40 Lakh Home Loan

FAQs

How can I clear my home loan faster?

There are multiple ways to clear your home loan faster. These include, increasing your monthly payments, making partial payments, reducing discretionary expenses, refinancing for better terms, or opting for shorter loan tenure. You must always check prepayment charges before proceeding.

Is it possible to repay home loan early?

Yes, early repayment is possible through prepayments or foreclosure. It helps save on interest but may incur prepayment penalties depending on your lender's terms.

Is it OK to close home loan early?

Closing a home loan early is generally beneficial as it reduces interest burden. However, it is important to assess penalties, tax benefits, and your financial capacity before making the decision.

What is the maximum time to repay a home loan?

Home loan tenures typically range up to 30 years. Opting for a longer tenure reduces EMIs but increases total interest paid. So, you must choose a tenure that aligns with your financial goals.

Are there penalties for prepaying home loan principal?

 

Most banks do not charge any penalties for the pre-payment of home loan principal on floating-rate loans. However, fixed-rate loans may attract a small foreclosure or pre-payment fee. You must check your loan agreement beforehand, as charges vary by lender and loan type.

How does a balance transfer help in repaying a home loan faster?

 

A balance transfer allows you to shift your existing loan to another lender that offers a lower interest rate. This reduces the interest burden, enabling faster repayment. With lower EMIs or shorter tenure options, you can save significantly over the remaining loan period.

Is it better to increase EMI or reduce tenure?

 

It is generally better to shorten the loan tenure because it reduces the total interest outflow. Increasing EMI also helps, but reducing the tenure accelerates repayment more effectively. The option best suited to you depends on your monthly budget, long-term affordability, and financial stability.

How do I calculate home loan EMI?

 

The formula for calculating home loan EMI is [P × R × (1+R)^N] / [(1+R)^N − 1], where P refers to the principal loan amount, R is the monthly interest rate, and N is the tenure in months. To avoid the effort of manual calculations and the risk of errors, you can use an online home loan EMI calculator. It provides quick and accurate results.

Can I use bonuses or lump sums for part pre-payment?

 

Yes, it is a good idea to use bonuses, incentives, or any lump-sum income for part pre-payment. It reduces the outstanding principal, lowers total interest payable, and can shorten the remaining loan tenure. You must check the lender’s rules regarding minimum pre-payment amounts before proceeding.

How does a CIBIL score affect home loan refinancing?

 

A high CIBIL score (above 750) improves your chances of getting home loan refinancing at lower interest rates. Lenders consider you a low-risk borrower, offering better terms and faster approvals. A low score, on the other hand, may lead to higher rates, additional documentation, or even rejection.

Disclaimer

Most Viewed Blogs

Trending Blogs

Calculator

Personal Loan EMI Calculator

Personal Loan EMI Calculator
Home Loan EMI Calculator

Home Loan EMI Calculator
Business Loan EMI Calculator

Business Loan EMI Calculator
Used Car Loan EMI Calculator

Used Car Loan EMI Calculator
Two Wheeler Loan EMI Calculator

Two Wheeler Loan EMI Calculator
Loan Against Securities Calculator

Loan Against Securities Calculator
Loan Against Property Calculator

Loan Against Property Calculator
More Tools
Our Subsidiaries
Our Private Equity Funds

Useful Links and Resources

Policies, Codes & Other Documents

Tata Capital Solutions & Services

Uh oh, something went wrong

Please try again later.

Most Important Terms & Conditions - Home Loans

Download in your preferred language

Download