Important Strategies to Pay off a Home Loan Faster
Finding the best lender is not the only important step while choosing a home loan. You also need to plan and manage the loan in a way that helps you repay it at the earliest. However comfortable the EMIs, a home loan does put a burden on your finances. Naturally, the sooner you pay it, the better. Repayment of home loan can become easier if you have some financial strategies up your sleeves.
Hence, we are sharing some strategies that you can consider to repay the loan faster.
Pay a Larger Down Payment
Paying a larger down payment can significantly reduce your debt obligation. The higher the amount you pay as a down payment, the lesser will be the principal amount of the loan. Usually, the down payment of loans is 20%-30% of the total loan value of the house. If you have savings or surplus funds, you can pay a higher down payment to reduce the total outstanding amount, interest amount, and monthly EMI.
Opt for a Shorter Tenure
The loan tenure is inversely proportional to the EMI amount. So, if you opt for a longer tenure your EMI would be lower, but there will be more interest payout in the long run. On the other hand, with a shorter tenure, you will be able to repay the loan faster and save on the interest payment. If you can afford to pay a higher EMI, it is usually the best option to opt for a short tenure.
Go for Prepayment
Pre-paying a home loan partially or completely is an easy way to reduce the loan liability. You can use surplus funds like a work bonus, a monetary gift, etc. Pre-payment would reduce the outstanding amount and help you repay the loan faster. However, it would be better to first check with the lender on the prepayment charges.
Pay Your EMIs on Time
Delay in EMI payments can prove costly for a loan. While late EMI payments can attract penalties, increasing the cost of the borrowings, it can also lower your credit score. You can also ask the lender to reduce the tenure and increase EMI in case there’s a rise in your income.
Stay Away from Further Debt
While you are paying the home loan EMI, avoid taking more debt as it adds to your financial burden. Similarly, avoid leaving any outstanding balance on credit cards and repay all dues on time.
Look for a Lender with the Lowest Interest Rates
Before you take a home loan, ensure that you have done adequate research. Review and compare the lenders carefully and choose the one that has the lowest interest rate. A home loan with a low-interest rate makes your EMI affordable and helps you repay the loan faster. Even a difference of a few decimal points on the home loan interest rates can affect the total cost of borrowing significantly. If you are paying a higher interest rate, you can also opt for a home loan balance transfer to reduce the EMI.
Repaying a high value loan is a major responsibility. Use these strategies to make loan repayment a little easier on yourself.