Top 5+ easy ways to repay your home loan faster
Home is one of the biggest investments, financially and emotionally. Hence, first-time home buyers stretch their budgets and avail of a home loan, which involves a long-term commitment of paying EMIs. For majority of borrowers, the repayment term of home loans typically ranges from 15 years to 25 years. However, if you have financial means, you should consider repaying it as soon as possible, which will help you become debt-free sooner. This article elucidates 5 easy ways to repay your house loans faster.
Benefits of repaying your home loans sooner:
- The longer the loan tenure, the more the interest you pay. Hence, repaying your home loans as early as possible can save your total interest outgo.
- You become debt-free sooner, which means you have free money to use for any of your needs, investing or splurging!
- Like other types of loans, you do not have to pay part-payment charges to the lender as part-payment on home loans with floating interest rates is allowed to a certain extent.
- Paying your EMIs on time or making a pre-payment will help improve your credit score.
- With good credit history and an increased debt-to-income ratio, you will be eligible for new loans at better interest rates that you might require.
- The chances of you missing or delaying the EMI will be reduced.
- It reduces financial stress.
- It is a relief to be in a stronger financial position.
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Top 5+ easy ways to repay your home loan faster : Overview
1.House loan borrowers must know this
House loan EMI is usually one of the largest outgoes for individuals on a monthly basis. With rising interest rates scenario leading to higher EMIs or longer payment periods, it makes the situation even more difficult. So, people look for ways to finish home loans quickly. Here are some ways one can repay a home loans faster by making changes in the payment cycle.
Text: Centre for Investment Education and Learning (CIEL)
One can make a lump sum part payment of the home loans at least once a year. A payment of 20-25% of the loan amount will reduce the home loans principal amount significantly and will then reduce the EMI amount or the loan repayment period. Borrowers can plan to make such lump sum payments at least once each year, maybe when they receive large payments, such as an annual bonus.
To start with, a borrower should try and choose a lender who offers the lowest interest rate and hence, a lower EMI. To add to that, one can still choose to pay a slightly higher EMI to reduce the home loans payment period. Borrowers can also choose to increase the EMI, by say 10% each year.
The borrower can choose a lower tenure for payment. This will lead to a higher EMI but will help the borrower reduce the interest burden on the loan. Also, the loan will get closed faster by following the tips stated above.
1) It is important to not miss a single EMI payment as this may attract a penalty. It can also affect your credit score negatively and make it difficult to avail of further loans.
2) Tax benefits are available for interest and principal payments, which can help the borrower save money that can be used to make part payments.