How to repay your home loan quickly
Buying a home on a loan? Read up on ways to reduce your loan burden.
Buying a home has been one of your dearest wishes. Now that you have borrowed a home loan and bought your home, it is time to train your sights on repaying the loan faster than scheduled. This simply means that instead of waiting for the loan to repay itself via monthly EMIs — which can take several years — you must also pre-pay periodically.
Here’s a simple guide on repaying your loan before term:
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* Make a plan. Once your EMI cycle begins, you must take stock of your finances and calculate how much spending money you are left with after the EMI is paid. Now set targets on how much money you will repay the bank every year via EMIs + periodic pre-payments. Take stock of how much income you have left over after the EMI is deducted, and which other sources of income (such as your spouse’s salary) you could use to make the repayments.
* Pre-pay money apart from the EMI. If your spouse is also employed, you could consider using a part of their income to make periodic repayments. Or your spouse could take up the mantle of running the household entirely while you focus on repaying the loan. Meanwhile, set aside incremental sums of money in your savings account. When the money reaches an appreciable sum, say Rs 30,000 or more, you can make the repayment along with the EMI. Periodic pre-payments lower the burden of the both the principal borrowing and the interest payable on it. Thus, your EMI also reduces and so does the overall amount of money you repay to the bank.
* Save money every month. Only by dint of regular savings can you accrue enough funds to make periodic repayments to the bank. Early repayment works in your favour. Set aside savings in a separate savings account that you normally don’t use. Every few months, you can transfer the money to the bank as part of your pre-payment strategy.
* Set curbs on spending. Apart from saving money every month, also set spending budgets and stick to them religiously. Once you cut out areas of extraneous spending (eating out often, shopping every fortnight, driving to work in your car instead of carpooling or taking the bus) you will end up with a lot of savings — which you can use to repay your home loan in India.
* Transfer your home loan for a lower rate of interest. Another great way to reduce the EMI burden is to look for ways to lower the interest rate on home loans in India. One way this is done is by taking a floating rate of interest — when market rates drop, so does the rate on your home loan. Another way is to transfer your home loan to another bank that offers a lower rate of interest.
