Home loan: Want to close your home loan as soon as possible? Try These Smart Tricks!
Often people take home loans to buy their dream home. But due to the long tenure and interest, people want to repay the home loan as soon as possible. For this, you have four options of closure or prepayment. Most banks and NBFCs offer prepayment facilities. But a home loan is a long-term loan and banks and finance companies get good returns on it. That's why many companies also levy some charges on prepayment. However, not everyone has to pay this fee.
RBI has increased the repo rate by 2.5 percent. After that many banks also increased MCLR. Which has a direct impact on home and auto loans. Consumers who were paying 7 percent annual interest on home loans 1 year ago have now come down to around 9.5 percent. If you want to close your home loan faster or reduce the burden, try these smart tricks.
PC: The Economic Times
Your income may increase in the last few years and your savings may also increase. So you can prepay part of the loan. This will reduce the principal amount of your loan. Along with this, the interest liability on this will also be less. Reducing the amount that goes as interest will reduce your overall burden.
A prepayment fee will be charged
Most banks charge a prepayment fee of around 2%. But not everyone has to pay this charge. Floating rate borrowers do not have to pay this charge. However, if the home loan is at a fixed rate, it can be charged. Home loan borrowers can prepay in a number of ways. If your income has increased, then you can increase your EMI. So that you can repay the loan before the stipulated period. If you want, you can deposit a fixed amount every year as prepayment. If you save throughout the year or receive a bonus, you can use it to pay off the loan. By paying this amount, you can pay off the home loan at the earliest.
PC: finlex international
Take a short-term loan
Also, you can keep the loan tenure short to reduce your debt. If you take a loan for 25 or 30 years instead of 15 years, then your EMI will definitely be less. But the interest on the total loan can be doubled. Shorter loan tenure means you will have to pay less interest. You can also make a higher down payment. Increasing the down payment can help you structure your home loan to cope with rising interest rates. Paying more in advance will reduce your home loan.