A home loan is funding provided by banks ( like Canara Bank home loan), NBFCs, and other institutions in the industry of finance. Availing a home loan is one of the easiest ways to gather funding to buy your own house. Moreover, the repayment of the principal credit is to be done in monthly instalments within a maximum tenure of 30 years.
We will discover some smart ways of Prepaying a home loan which is jotted down in the below pointers:
- Prepay a portion of the principal credit to reduce the loan tenure. A part prepayment is suggested in cases of long term tenure repayments, where a borrower can cut down on a lot of interest rates just by prepaying a certain amount of the loan. If an individual had taken a home loan in the early 20s or 30s then he/ she should be able to repay the debt within a time of 8 to 10 years considering the savings, increments, bonuses, and surplus income, etc. Another question could arise in such situations, whether the lender allows the facility of part payment or not. This question should be addressed before availing of a home loan, where the borrower inquires regarding the fees and charges involved in the process.
- You can also use your mutual fund savings to prepay for your home loan debt. Investing money in a mutual fund through SIP can provide an individual with a considerable sum of money after a period of time. For example, if your home loan debt amounts to INR 25 lakh which has to be paid within a period of 25 years. Simultaneously while paying for the EMI installation, if you invest INR 5,000 every month, then after 15 years you will be able to avail an amount of INR 24 lakhs. This sum can be later used to prepay the loan amount, thereby saving on the high-interest rates.
- Another way of prepaying home loans is by increasing the amount of monthly EMI installation. If a borrower is paying a low EMI for longer-term tenure, he/ she will end up paying a lot more interest than an individual paying a high EMI on a short term loan. If you have already taken a long term loan for repaying your credit then you can contact your lender and request to restructure the tenure and EMI instalment of the loan. Opting for higher EMI in case of a home loan will help in clearing the loan much sooner. There are also methods of step-up home loans that can be availed by a borrower to increase the EMI instalment amount on the increase of one’s salary. Under a step-up loan, a borrower becomes eligible for availing a higher loan amount which might be needed sometimes while selecting the favourite house.
- It might have happened that you had takes a home loan at a higher interest rate because of a moderate credit score and low-income rate. With time if the circumstances change and you have a better credit score and a greater income, then you can switch to another lender offering you a low-interest rate on your home loan. By doing this you can lower your entire repayment amount as the interest rate has been reduced. Moreover, you will have the benefit of restructuring your home loan with respect to the repayment tenure.
- Investment is another option that can yield you greater returns at an equivalent interest rate to the home loan that has been acquired. Later the returns of the investment can be used for the purpose of repaying the loan. For example, the monthly salary of an individual is INR 50,000 per month and he/ she is able to save at least INR 5,000 every month. This saving can be used for investing in various options like RD, FD, PPF, Mutual funds, Stock, post office saving schemes, etc. After a term of 5 to 10 years, the returns of the savings can be withdrawn in order to prepay the loan amount.
Also read:- The Easiest Way To Get The Home Loan
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