With home loan interest rates in India becoming more affordable for the middle-class, buying a house in the country has become extremely convenient. However, even if you have availed of an easy home loan, managing repayments such that they do not become a burden on your pocket is challenging. Here are some ways you can manage your home loan payments better and end up with considerable savings at the end of your loan.
- Choose an Adequate Loan Tenure
Home loans are usually some of the longest-running loans for most people because of the sizeable principal sum. However, most borrowers get an option of extending or shortening their housing loan tenure by a few years.
If you want to save on home loan interest payments, choosing a shorter repayment period might be a wise option. Go to your lender’s website and use a home loan EMI calculator to check how much you will save on interest if you reduce the repayment tenure. If the savings are considerable and you can afford higher EMIs, choose a shorter tenure.
Another option you have is to lengthen your loan repayment tenure. By doing this, you can reduce your EMIs and stabilize your cash flows. While this may mean paying more interest, you can always make prepayments to reduce the interest burden mid-loan. Before choosing this option, ensure that you use a home loan calculator to check the EMI; you will be paying with a shorter tenure.
- Manage Your Cash Flow
Whenever you apply for a home loan, you should be prepared to devote a portion of your monthly savings towards EMI payments. To make these payments more comfortable for yourself, you should look at ways to maximize your cash flow. If you have any investments that pay you bi-monthly, monthly, biennially, etc., it doesn’t hurt to utilize those payments towards your loan repayment. The key to effective EMI management is maximizing your cash flows by closing investments that produce little to no returns and investing in plans that deliver more.
- Make Prepayments
No matter how convenient your home loan interest rate is, it is always a burden, and the more you can reduce the interest paid, the better your loan will be for your pocket. Making lump-sum payments for your home loan online or offline will mean that you get rid of your debt quicker than initially planned. You can utilize gains from shares, stocks, bonds, insurance, or other investments to make huge prepayments once in a while towards your loan. Try to make prepayments towards the beginning of your loan tenure since the outstanding principal amount is usually high.
- Opt for Home Loan Balance Transfer
People often regret choosing a particular lender a few years into the loan because they find a better lender offering lower home loan interest rates and more convenient payment options. If you have also found a new lender opting to lower the cost of servicing your loan, do not hesitate to opt for a home loan balance transfer. Check your home loan eligibility with the new lender, use a home loan calculator to find out how much you will be saving on your EMIs, and make a note of the additional costs of a balance transfer before choosing this option.
All of the ways mentioned above will help you cost-effectively manage your home loan. Follow them to make your home loan easy-breezy on your pockets!