Follow the Tricks to pay off your home loan faster
Anybody would like to pay off their loans as soon as possible. The longer the tenure of a loan extends, the higher interest you have to pay. One of the best courses to save money is to pay back the loan as soon as possible. With loans such as home loans, the tenure is often stretched up to 15-25, even 30 years with an increasing home loan interest rate. Although many would like to repay the debt at the earliest, they often fail to do it either due to low funds or not being aware that simple tricks can be followed to pay back your loans faster.
What course should you take to pay off your home loan faster?
Follow these simple tricks to end the burden of your home loan debt as soon as possible.
Increase the EMIs
Buying a house is a big deal for many people, so if they find that the tenure will stretch on for a significantly long time, they just extend their budget and end up spending more than they initially planned. As a result the periodical home loan EMIs get high. Controlling your expenses according to your repayment capability can limit the EMIs. You can increase the payments to save your money from the big interest outflow and be done with your liability faster.
However, it is not necessary to always control your budget at the time of buying the house if you are confident that your financial portfolio will look better in a few years. Even if you increase your EMIs by as little as Rs. 2000, it decreases the loan tenure significantly, not to mention the extra interest amount you are saved from paying. You can use a home loan EMI calculator to know the EMI amounts and tenure.
Take advantage of zero prepayment charges
If your loan provider doesn’t charge a penalty for prepayment of the loan, you should make full use of it by paying the debt back in lump sum whenever you have extra money to spare. This will lower the principal amount as well as the home loan interest rate over the course of the tenure saving you money in the long run.
Some lenders have a limited number of prepayments per year that can be made while others have no set limit. Make sure to sort out the details at the time of taking the loan.
Maintain same repayment pattern even with falling interest rates
The economy is a volatile entity and its components often fluctuate. In this regard, the interest rates for loans often decline. A decreased interest rate would also mean that the EMI you have to pay now will be lower. But don’t go for that, keep paying the same amount of EMI that you have done for so long. By maintaining the same repayment pattern, you are now paying more EMIs, which will decrease tenure and pay off the loan faster.
Use the tax benefit
The income tax benefit is Rs. 2 lakhs for interest payments on home loans in one fiscal year. People who belong in the higher tax bracket can bring down the cost of a loan by significant amounts. Those who are in the 30 % tax bracket can save almost Rs. 60,000 per year on home loan interest payments.
Open an offset account
An offset account or an interest saver account is linked to the home loan account and the money you save in the offset account is diminished from the amount you owe. Interest is charged on the difference. The interest you pay on your home loan is inversely proportional to the amount you have in your offset account. Before you open sucha account, you should check the interest rate charged on this facility.
Having a loan stretching on for years is truly a burden. With the tricks mentioned above, the good news is you can repay the debt faster and live a life without worrying about EMIs.