Every home loan comes with a specified date on which the borrower must pay off the loan to the lender. However, sometimes the borrower may choose to pay off the EMIs for the loan in advance. This is known as home loan prepayment. Since the amount is not a part of the EMI routine, this will be considered as repaying the principal amount.
In this article, you can learn comprehensively about home loan prepayment. So, make sure you read this till the end. It is bound to help you.
What Is Home Loan Prepayment?
As we have discussed above, a home loan prepayment is one wherein a considerable portion of your home loan is paid off before its due date. This can be very helpful in many ways. You can enjoy a reduction in your monthly EMIs and also experience the benefit of lower interest rates. The best part is that no maximum amount is prescribed for paying these prepayments. However, the minimum amount is the total of three EMIs put together.
What Are The Benefits of Home Loan Prepayment?
- You can become debt-free sooner than you thought.
- The interest rates will be lower, and you can enjoy a reduction in your EMI as well.
- Prepayment allows you the flexibility to pay any sum of money according to your budget and requirements.
- This also helps improve your credit score, which can prove to be efficient in acquiring other loans in the long run.
- Leaves you with peace of mind by easing financial stress.
How To Calculate Prepayment Charges?
The RBI guidelines state that those who have a home loan linked to a floating interest rate are not entitled to provide any additional fees on foreclosure or prepayment. This implies that the borrowers are at liberty to select prepayment as per their funds. Individuals who have their home loans linked to fixed interest rates must pay off the low charges during prepayment. So, you must keep in mind the type that is most convenient for you.
Is Prepayment Of Home Loan A Wise Option?
Somedays, you might have sufficient funds to help you pay off your home loan on time. On those days, it is wise to opt for prepayment of home loans to get over the dues before time. This, of course, comes with a lot of benefits. But the most important advantage is how it rids you from the obligation of spending a sum every month on your home loan.
So, once you are done with the prepayment, you can start focusing on other spendings that deserve your attention. Prepayment can be done both in parts and as a full amount. So, find out which is most suitable for you and go for it. In both ways, you will receive peace of mind like never before.
Speak to your lender about prepayment of home loan to understand what other prerequisites you may have to follow all along. In most cases, the process is quick, simple, and easy.
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