New Delhi, Everyone dreams of having a home of their own. For Indian consumers, this is a major goal of their life. It is also one of the biggest expenses of life. Most people take a home loan to buy a home. A home loan fulfills a customer’s dream of their home, but repaying this loan for a long period of about 20 years is a difficult process. EMI also creates a financial pressure in a situation like the Corona epidemic. This financial pressure in the form of EMIs persists until the debt is over.
Home loan customers can reduce this financial pressure by some measures. One of these is to speed up the repayment process and repay your home loan well in advance. This will save you interest and will also relieve you from the financial pressure of EMI. Today we will tell you about some such measures by which you can reduce the burden of your home loan.
Atul Monga, co-founder and CEO of Basic Home Loan, says that to ensure fast repayment of home loans, you can opt for a short-term loan instead of a long-term one. That is, you will have to deposit extra money in your home loan account instead of EMI. Doing this will reduce your interest costs. Anyway, it is a better option to pay the loan ahead of time. In this case, premature payment of principal will save you from the payment made under the head of interest.
Secondly, refinancing a short-term loan seems attractive at times, but when it comes to increasing the EMI, the situation becomes a bit different. If you already have a home loan, you should talk to the bank to refinance it at a lower interest rate. However, not all banks are willing to do so.
According to Monga, in this case the customer will have to keep an eye on the interest rates being offered by other banks. By doing this, you can get relief in interest rate by transferring balance to another bank. However, during this time you will have to pay a certain amount in the form of a penalty to the existing bank and a processing fee to the new lender. Therefore, it is important that you do a very thorough assessment before doing so and then decide. Otherwise, you may have to pay more money to save some money. If you put forward a short-term loan option, then your bank may offer a loan at a lower rate of interest. By doing this you can close the home loan sooner and save more amount instead of paying low interest rate EMI.
Let’s try to understand it with an example. Suppose you have taken a home loan of Rs 70 lakh for 20 years at an interest rate of 8.5%. In this case your EMI ie EMI is Rs 60,748 and you have to pay the total amount of Rs 14,579,520 along with the principal. Now suppose that after four years, your bank reduces the interest rate to 7.5%, then your EMI will be reduced to Rs 56,392. That is, you will be saving Rs 4,356 every month. In this sense, you will be able to save about 10 lakh rupees. But if you are in a condition to bear the EMI of Rs 68,932, then you can reduce your loan term to 12 years. By doing this, you will have to pay more on the EMI item, but in the long run, you will save around Rs 22 lakh.
Increase EMI amount with increase in income
Home loan is the longest term loan among all the loans in the market. That is, your income is expected to increase in this long period. According to Monga, if you are a salaried person, you should pay an additional amount if possible, with an increase in your salary. This is the most excellent way to repay the debt, because with it, you are repaying the principal. A slight increase in EMI can bring a big change and it can help you reduce the remaining term of the loan.
Take the help of SIP
The cost of a home loan is very high and it can be a big burden on you. In many cases the interest paid is more than the principal. In the above example it can be seen that where the consumer had to pay a total of Rs 14,579,520, that is, he had to pay an additional payment of Rs 76 lakh as interest. However, there is a way to avoid this. Do you know that you can prepay your home loan with the help of a SIP?
According to Monga, if you put 0.10 per cent of the amount of Rs 70 lakh in SIP, then you will have to pay Rs 7,000 a month. In 20 years, you would have invested Rs 16.80 lakh and your total capital would have been Rs 1.04 crore. Even if you remove the capital invested from it, you will have Rs 88 lakh, which will be more than the interest payment you make on the home loan. With the help of this amount, you can reduce the amount of principal by making a higher down payment.
