Repaying a home loan can be a daunting task. That is because your EMIs can stretch for several years. Most lenders offer tenure of up to 30 years.
But what if you want to get rid of the burden early? Well, prepaying your home loan can be a good option. Banks and NBFCs allow you to pay off your property loanbefore the tenure is over. But how will you go about it?
Here are some superb tips to close your home loan earlier.
1. Increase Your EMIs Whenever Possible
Your income is likely to increase during the loan. In that case, it is better to increase your EMI amount. That will reduce the outstanding loan amount. As a result, you will be able to repay your loan before the term gets over.
Salaried individuals often get yearly increments. So, they can easily increase their EMIs. But, you have to make sure that it does not affect other expenses.
2. Prepay Your Loan If You Get Extra Money
Maybe you have got a large sum in the form of allowances. Or your business might make an unexpected profit. Well, it is best to close your ongoing loan in such cases. After all, who likes to bear the burden of debt for long? Moreover, it will give you a sense of relief. And, you will also be able to manage your future finances with ease.
3. Go For A Property Loan Balance Transfer
Going for a loan transfer can help you pay it off earlier. But what is a balance transfer? Well, it is a process where you transfer your existing loan to a new lender.
Now, how will that help you? Well, if the new lender has a lower interest rate, you can pay off your debt quickly with ease. But, you need to make sure that your new lender also offers a shorter tenure.
Well, you need to consider certain things before opting for a balance transfer.
- Calculate the transfer charges and penalty. If these charges are more than your savings by transferring the loan, do not go for it.
- It’s no use transferring your loan if your new lender doesn’t charge a lower interest rate.
- Check whether your home loan has a provision for balance transfer.
Can Your Lender Penalise You For Home Loan Prepayment?
Well your bank can levy a penalty for prepayment if the interest rate is fixed. Fixed interest rate denotes that the rate remains unchanged throughout the tenure.
However, your lender cannot take prepayment charges if you have a floating interest rateup to case of floating rates, your interest rate changes with the ups and downs in the market.
The Bottom Line
It’s not a wise idea to continue paying your home loan EMIfor years. If you get the opportunity, it is better to pay it off earlier. It can help you save your hard-earned money.
However, always make sure that your loan prepayment benefits you in the long run. Otherwise, what’s the use of going for it?