Availing of housing finance is a common practice among Indians. Considering high demand in the real estate market, the age of affordable or luxury homes, and consistently rising property prices, many prospective homeowners depend on Home Loans to buy their dream homes. However, arranging a down payment and meeting the loan provider’s eligibility criteria is not the end of the game. One must make a robust plan to manage the Home Loan EMIs efficiently.
Since skipping the loan EMIs is risky, leads to penalties, and deteriorates the credit score, we bring you seven smart tips to manage Home Loan EMIs better.
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Opt for a Loan Plan with Cheaper Interest Rates
Conducting extensive research is the first and foremost step before you apply for Home Loan. Compare the loan plans from various loan companies and zero in on the lender offering the cheapest interest rates on housing finance. Doing that will keep EMIs manageable before the due date.
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Prioritise and Plan
Another useful tip is prioritising EMI payments on time, as making payments before the due date enhances credibility and builds a good credit history. An important step would be to schedule automatic payment before the due date to avoid default due to missed payments. Make it a priority never to skip the EMIs as it decreases credibility with the loan company. Eventually, long-term default causes the property to become attached to the lending institution.
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Opt for a Shorter Loan Term
Loan companies provide the option of choosing a repayment term according to the borrower’s convenience. While a long tenure reduces the EMI amount and makes them easy to manage, choosing a shorter duration with bigger EMIs seems challenging. However, it makes the borrower debt-free sooner and reduces the total cost of interest outgo. So, aspiring borrowers should evaluate their budget and explore their additional income and affordability options while opting for an EMI amount.
A Home Loan EMI calculator helps calculate EMIs for different loan terms. Try choosing the shortest possible loan term according to your monthly budget and repayment capacity.
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Opt for a Lump Sum
Using bonuses and maturity proceeds for pre-paying the Home Loan in small parts is advisable. Making lump sum payments whenever possible reduces the loan term considerably, especially if the borrower pre-pays during the term’s early years when the outstanding principal amount is high.
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Use an EMI Calculator
Many finance companies offering Home Loans also have an EMI calculator for applicants’ use. A Home Loan EMI calculator helps estimate the Home Loan EMIs payable each month. The tool calculates the EMIs based on the loan amount, interest rate, and tenure. Knowing the EMIs beforehand helps the borrower select a suitable loan tenure according to their repayment capacity. Users can consider their income and financial obligations while choosing a loan tenure with budget-friendly EMIs.
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Pay an Extra EMI Each Year
Paying an additional EMI might be a difficult endeavour initially, but it pays off in the long run. Borrowers with a floating interest rate housing loan must try paying an extra EMI each year, as they do not need to pay any prepayment charges. With additional payments, they can substantially reduce their principal balance at large.
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Switch the Lender if Need be
During the loan term, a situation may arise wherein the borrowers realise that servicing the loan according to the current terms is too challenging. At that point, they can start looking for another lender offering a lower interest rate or better terms and conditions on the same loan scheme. Since loan plans differ between lenders, switching the loan company if required is recommended. Also known as a Home Loan balance transfer process, switching the loan provider is seamless and requires minimal paperwork and nominal charges.
Following these suggestions diligently will be a cakewalk that helps manage the Home Loan EMIs effectively. Ultimately, it boils down to handling the finance wisely and mindfully. Comparing loan plans before applying for Home Loan and following suit can keep the borrower free of worries and help manage the EMIs more efficiently without struggle.
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