Extended repayment tenure can be a bane as much as it is a boon since longer the time period more will be the uncertainty of cash flow. The term for home loan EMI can extend till as long as 30 years. Planning a repayment for a period this long can be a difficult task since it might not always have the outcome as planned due to unforeseen incidents.
However, with a few simple tricks, borrowers can effectively increase the chances of avoiding a default.
Following are a few of the best steps to ensure smooth management of home loan EMI payments.
Step 1: Opt for affordable interest rates
Home loan interest rates can be fixed or floating, and the figures differ across lending institutions. According to your monthly disposable income, choose from the two categories, and then from the wide range of interest rates under each type. Note that these rates can also vary depending on a borrower’s eligibility. Therefore it is always advisable to make your payment breakup easier with an online EMI calculator. Also, avail the benefits of calculating EMIs before taking a home loan and choose the interest rate best-suited for you.
Step 2: Shorten repayment tenure
A longer loan tenure easily facilitates smaller EMI amounts. However, at the same time, borrowers need to bear interest on the same for an extended period, eventually adding up to a higher borrowing cost. An easy way to cut down on interest payment is by shortening the home loan EMI tenure as much as possible. Although you might experience financial constraint with a larger repayment sum every month, you will also enjoy greater savings in the long run.
Step 3: Schedule and prioritise a repayment plan
After choosing “home loan online apply” and successfully qualifying for one, it is time to plan your repayment. Paying off debt should be your primary concern when opting for any form of credit. Make effective budget planning by setting aside EMI repayments and then planning your monthly expenses from the remaining income. Timely repayment will not only help you clear debt off faster but will also aid in boosting your credit score. To avoid the additional charges of a late EMI payment, settle for most suitable one from multiple home loan repayment options to choose from.
Step 4: Make prepayments
It is always a good idea to pay an extra EMI every time the convenience arises. Making home loan EMI prepayments will not only reduce your principal repayment amount quickly but will also help cut down on interest payment. Individuals can utilise finance influx from a salary hike or bonus for this purpose. This way, they can also unlock home loan offers that certain NBFCs offer on early payment.
Step 5: Refinance your home loan
When all else fails, and your EMI repayment doesn’t go as planned, opt for refinancing. If your home loan EMI repayments begin to feel like a burden, you can always shift your outstanding balance to another lender offering lower interest rates. Note that this process entails specific charges which vary across lenders, which borrowers must compare to shift their home loan with maximum profit.
Apart from managing EMIs, availability of other terms of services like pre-approved offers can certainly make the loan application process much more streamlined. These pre-approved offers are available for financial products like home loans, loans against property, etc. To avail this benefit, borrowers can check their pre-approved loan offer beforehand.
In addition, potential borrowers can also use a home loan calculator to check their available funds before calculating EMIs. This way, they can stay prepared for overall financial expenses.