Moving into our own house is nothing less than a dream come true. Home loan is our life’s biggest financial commitment, a way to create a lifetime asset and a way to transform your dreams into reality without making a hole in your savings. Even if the margin of error while the repayment of loan amount is small, it need to be handled carefully. Just ensure that you have enough balance in your bank account can make things easier to repay your loan on time but before the end of the loan tenure. But paying EMI’s regularly becomes difficult to handle if not managed properly. Home loan EMI does continue for atleast more than a decade and a major expenditure of every month. Hence, the borrowers look for various ways to reduce their interest burden.
It is one of the best ways to finish your home loan before the loan tenure ends. Slightly higher EMI’s can help you to save a number of months or years from the loan period. Home loan buyers have work efficiently and smartly look for different ways to increase the generation of funds to increase the EMI part.
The objective to deal with loans properly is to maximize the cash flows. Keep an eye on out flow (monthly payments) and inflow of monthly returns on investments. If your investments are not paying you good returns, it’s better to close that pool and fill the same in your home loan. You can also try to save some amount in such investments which can give returns of 12-15%. This will help to gain more returns as compared to what you pay as an interest on your loan. The differential amount can be used to pre-pay the loan.
The longer time to pre-payment of your loan results in higher rate of interest is charged. Partial is a speedy way to lower the loan amount and the loan tenure as well. Though the benefits vary from bank to bank but one of the best benefits of partial payment is that few banks do not charge fee for the facility. Any one time source of incomes like income by selling any property, bonus or gains out of stocks, matured FD’s or any gifts from family or relatives can be used for partial payment of the loan.
Switch to another BANK/NBFC that offers lower interest rate to save on home loan interest rates. Under balance transfer the entire unpaid principal amount is transferred to a new BANK/NBFC. One should avoid switching from one bank to another very often for minute rate difference as when you switch you have to go through the complete process of underwriting along with other technical and legal paperwork again and again. An extra amount as a nominal fee is being charged by the lender for providing this facility. During the festival time, banks offer with lucrative offers to grab more of home loan market. So, be careful and keep an eye on the home loan market to avoid any mistake. (Know more about the difference between Bank’s & NBFC’s)
Skipping on your EMI’s will not only pull out extra cash from your but also affect your credit score. Ensure that your loan account is never tagged as Non Performing Account (NPA). Account is said to be a NPA when payments remain outstanding for 30-90 days after due payment date. It is important to understand the need of the loan. One should not borrow a new loan until you repay the older ones. (Know about the consequences of not paying EMI on time)
Never forget to keep a constant check on your credit score because only a good score can lead to negotiate on your own terms and conditions. Keep a latest copy of your CIBIL Score before starting your home loan process. The potential lenders can also guide you to take necessary steps for the improvement of your credit score. (Credit Score- A complete guide)
Just because X scheme worked well for your friend does not mean that it will suit you too. If a fixed rate loan scheme worked for him then an adjustable rate might work for you well or vice-versa. Every borrower has different need and financial situation. So, it’s always better to understand thoroughly which loan type suits best for your needs. (Compare your loan from Various Bank’s & NBFC’s)
The Mudra Home mortgage calculator helps to understand the sustainability of your home loan. These are simple, convenient and easy to operate tool that helps to know the monthly mortgage payments, cash down payments and the interest rate. These calculators help to give you a clear picture of home loan schemes that suits best for you and also easy to handle financially. It also helps to estimate the amount that you will need to save for routine expenses and other saving investments.
By keeping all the above points will help you to manage your loan properly. After all, it’s your money and only you know how to manage it in a right way. It’s high time to act like a Fund Manager. Only after the loan closure will make your home your own. This not only relieves you from a mental strain of debt but also release money flow in your family budget.