Ways to pay your EMI within the time period
The home loan EMI is a repayment of the loan within a stipulated period of time with the principal amount along with the interest. The moratorium of the loans should be maximum up-to 30 years. The eligibility for the duration on which loans are charged depends on the candidate’s age at which he/she opts for the loans. The higher the age lower is the duration at which the borrower gets home loan. While as lower the age higher is the loan limit duration available for the borrower to take the loan.
Once the housing loan is sanctioned, the next step is involves the efficient management of monthly EMI. Paying the EMI on time increases the creditworthiness. Schedule the EMI close to your salary date to ensure sufficient funds in your account and minimizes chances due to lack of fund. Skipping the EMI attracts the stiff penalties from the lending institution, negatively affects the credit score and the prolonged default can result in your home being attached by the lender.
Steps to reduce the interest on loans:
· Use lump-sum to repay: Windfall when bonus or maturity proceeds from insurance policies should be used to pre-pay part of the home loans from time to time. For pre-paying Rs. 1 lakh after three years for a rupees 50 lakh loan with a tenure of 15 years at 9% you can save about Rs.1.95 lakh and reduce the tenure by five months. If the borrower pay lump-sum payments you can bring your loan tenure dramatically. It is better to pay the lump-sum payments of the loan tenure dramatically. It is better to make the lump-sum payments of the loan when the principal outstanding is high.
· Pay more to let interest outgo: Paying the higher EMI in few months rather than delaying can help borrower get interest benefit. If you can extend the tenure to pay lower EMI every month you will save much more than the interest outgo than if you have opted for a shorter period.
· Pay extra EMI every year: Try and pay extra EMI every year. Though it can be tough initially, it pays off handsomely in the long run. There is usually no EMI for floating rate term loans. By paying extra EMI every year you can reduce your overall outstanding principal amount. The lender does not objects when over the re-payment of the loan in early stage. Over a 10-12 year period the impact is great.
· Re-finance the loan to cut burden: If you find the servicing of your home loan can become lower if you moved to a lender having better rates, make the switch. Lenders often lend their rates at different intervals. The opportunity allows you to save on the interest by allowing the lender to shift to a different rates. The switch will entail the loan appraisal process, redoing the paperwork and payment of fee.
· Make an SIP from the savings so as to increase the re-payment capacity: The borrower from the monthly systematic investment plan can put the amount from the savings thus help grow the money in a rapid way thus helping gain corpus and thus the principal amount plus the dividend amount can be made available to re-pay the loan EMI.
· Use of emergency funds: Lack of income is a largest obstacle to your loan payments. The borrower may be forced to default the loan if the borrower loses his job or suffers a huge loss
into business. Hence it is mandatory for the applicant to keep huge sum into the fixed deposits or any debt instrument.
· Raise funds by disposing of assets: The assets disposal can be a better option for the borrower to raise funds and thus gain some liquid cash in hand so as to re-pay the loans with the help of that funds in a faster way. The funds can be generated by the help of sale of old car, sale of gold and jewellery items, or by sale of bike. The liquid cash gained in hand can be used to repay faster EMI.
Thus we can conclude that if the borrower manages to repay the loans in a faster way then the borrower can benefit from the loan instalments by saving a huge sum. The faster repayment by liquidising funds can help the borrower save interest amount and thus help utilize the funds in other daily routine expenses. The borrower can still claim a tax benefit on early re-payment of loans. The borrower should increase the saving habits and reduce excessive expenditure thus to re-pay the loan in a fastest possible way.