Purchasing a residence requires substantial funds. When savings do not suffice to meet such expenses, home loans are the most sought after option to avail funds. However, home loans are long-term financial commitments, and home loan repayments require proper financial planning from borrowers.
Choosing a long repayment tenor for a home loan also has certain drawbacks. Home loan repayment schedule if dragged for long tenors can lead to excessive payable interests. It also means indulging your income in repaying the loan for a longer span. This prolonged debt could pile on with other financial commitments and result in a major burden.
Repayment of the funds is one of the crucial factors to consider before availing a home loan, especially if the borrower is looking to reduce the gross interest payment. A planned approach is required to repay the home loan faster.
3 Smart Ways to Repay a Home Loan Faster
The following home loan repayment options can help you pay off the debt sooner –
- Paying an amount higher than the stipulated EMIs
Many lenders provide customers with the facility of paying an additional amount while meeting the EMIs. For instance, if the stipulated EMI stands at Rs.12,500, you can go on to pay a rounded off amount like Rs.15,000. Even the minimum additional amount you pay will help you repay the loan earlier.
In cases where a borrower anticipates a hike in their income, he/she can request the lender to permit the step-up facility on loan repayment. This will increase the EMIs progressively over the years. Home loan repayments can also be completed sooner by utilising high profits, monetary gains, or bonus payments in paying a substantial portion of the loan.
- Restructuring the loan into a shorter tenor
Repayment tenors for a home loan could range up to 25 years in case of certain lenders. If you wish to trim your home loan tenor, you can request the lender to restructure the loan into a shorter period. You can choose the shortened tenor as per your convenience. This will mean the liability of paying increased EMIs for the remaining tenor. If your finances allow you to pay higher EMIs, you can request the lender to adjust the home loan repayment schedule into a shorter one.
- Opting for a home loan balance transfer
You can opt to transfer your home loan balance to a different lender to avail better repayment terms. This means, switching your home loan with a different lender who might be charging a more affordable interest rate. This will help you bear a lesser financial burden, and pay off the loan well ahead of the stipulated tenor.
Prepayment of a home loan is an important point in this context. It helps save a considerable amount on the interest outgo.
Other than the above-mentioned ways, borrowers can also use the home loan repayments calculator to check on the EMIs and plan the forthcoming payments accordingly. Having a proper idea of the estimated EMIs helps a borrower arrange funds accordingly and repay the home loan easily.