Loan tenures: 10+ things you can do to manage longer loan tenures.

10+ things you can do to manage longer loan tenures : Home loan repayment loan tenures have become longer owing to repo rate hikes in the last one year, and for many borrowers they have now even stretched beyond their retirement age. Many borrowers are reeling under acute pressure owing to longer tenure of their loans after the announcements of back-to-back hikes in the interest rates.

One of the main disadvantages of a longer loan tenures is that it can result in paying more in interest over time. This is because the longer the loan tenure, the more interest accrues over time. This can ultimately lead to a higher total cost of the loan. If you have a long-term loan, it can limit your ability to make other financial decisions and investments and may even prevent you from pursuing other important goals like saving for retirement.

Home loans repayment loan tenures have become longer owing to repo rate hikes in the last one year, and for many borrowers they have now even stretched beyond their retirement age. Many borrowers are reeling under acute pressure owing to longer loan tenures of their loans after the announcements of back-to-back hikes in the interest rates.

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One of the main disadvantages of a longer loan tenures is that it can result in paying more in interest over time. This is because the longer the loan tenures, the more interest accrues over time. This can ultimately lead to a higher total cost of the loan. If you have a long-term loan, it can limit your ability to make other financial decisions and investments and may even prevent you from pursuing other important goals like saving for retirement.

Home Loan: Smart ways to manage a longer tenures loan

Review your financial situation: Check your finances to determine how much extra money you have each month to pay off your loan.

Negotiate with the lender: Talk to your lender and see if they can restructure your loan or offer you a lower interest rate.

Partial payment of a loan: It means that you can make a payment towards the outstanding principal amount of the loan, which is less than the total amount due. This can be done at any point during the loan tenures, and can help you reduce your debt burden and the total cost of the loan over time. There are some advantages to making partial payments on your loan.

First, it can help you reduce the total amount of interest you pay over time. This is because interest is usually calculated on the outstanding principal balance of the loan, so by reducing the principal amount, you can also reduce the amount of interest charged.

Second, making partial payments can help you to pay off the loan faster. By reducing the outstanding principal amount, you can decrease the total number of payments you need to make, which can shorten the loan term and help you become debt-free sooner. However, it is important to note that not all lenders allow partial payments, and some may charge prepayment penalties or fees for early repayment of the loan. Additionally, it is important to check with your lender to make sure that any partial payments you make are applied correctly to the outstanding balance of the loan, and to ensure that there are no hidden fees or charges associated with partial payments.

Adhil Shetty, CEO, Bankbazaar.com, says, “If you pay 5% of the loan balance every year, you can pay off your 20-year loan in 12 years. Prepaying one additional EMI every year can close your loan in just 17 years, and if you increase your EMI by 5% every year, you can finish your loan in less than 13 years.”

Look for additional income sources: Consider getting a part-time job or starting a side business to increase your income. You can use this additional income to pay off your loan.

Prioritise your expenses: Make a list of your expenses and prioritise them. Cut back on unnecessary expenses and focus on paying off your loan. You can avoid going out for food too often, buying non-essential items, etc.

Use your retirement savings: Consider using your retirement savings to pay off your loan. However, this should only be done as the last resort. Often you must not touch your retirement savings but if your loan tenures is longer than expected, you can use these savings to bring down your financial liabilities.

Seek financial advice: Consult a financial advisor to help you make informed decisions about your loan and retirement.

Refinance your loan: Refinancing your loan may help you get a lower interest rate and reduce your monthly payments. Refinancing involves replacing your current loan with a new loan that has different terms and conditions, usually with the goal of obtaining a lower interest rate, reducing monthly payments, or changing the loan’s duration. Look at your current loan terms and assess if refinancing makes sense. Consider factors such as your credit score, income, and the terms and fees associated with refinancing.

Consolidate your debt: Consider consolidating your debt to make it easier to manage your payments. If you have multiple loans, you must close your loans and focus on only serving one big loan rather than paying EMIs for several loans separately.

Sell some of your assets: Consider selling assets such as a second home or a car to pay off your loan. This can help you reduce your monthly expenses and make it easier to manage your finances.

Longer loan tenures can expose you to more interest rate risk. Interest rates may rise over time, increasing your monthly payment and the total cost of the loan. Therefore, it is advisable to take corrective steps at the right time.

Debt Burden

• Back-to-back hikes in interest rates have led to longer repayment loan tenures for home loans
• Using your retirement savings to pay off your loan should only be done as the last resort
• Refinancing your-loan may help you get a lower interest rate and reduce your monthly payments