Know how you can pay your home loan EMIs early


Unlike unsecured loan variants, home loans are usually big-ticket advances. According to a recent report, around 38% of consumers were willing to acquire a home loan between Rs.30 lakh to Rs.1 crore. These big-ticket loans pose a long-term liability, with several borrowers stretching their loan tenors up to 20 years.

Though a home loan is highly beneficial when it comes to owning a house and availing tax benefits, it also impacts a borrower’s present and future finances. Hence it is imperative to pay off the home loan EMI at the earliest.

Following are a few ways you can close a home loan early.

Reduction of home loan tenor

The tenor of a home loan plays a vital factor in closing a home loan faster. Borrowers can opt for a shorter loan tenor to ensure that the loan is repaid quickly. As the loan tenor directly impacts home loan EMI, this would mean that borrowers would have to pay a higher repayment amount. Shorter the loan tenor, the higher the equated monthly instalment and vice versa.

One can use a home loan EMI calculator to instantly calculate EMIs based on the loan amount, tenor, and interest rate. This would allow a borrower to arrive at the EMI amount he/she can repay and close the loan at the earliest.

Building a SIP and going for a higher payment

Oftentimes the amount paid on the home loan’s interest is more than the actual loan amount in several cases. This particular way of closing a loan early can be better understood with an example. For example, a borrower takes a loan of Rs.70 lakh at an 8.5% home loan interest rate in India for 20 years. Here, the monthly EMI applicable for the borrower would be Rs.60,748, and the total payment to be made would be Rs.14,579,520, including the principal amount. The extra Rs.76 lakh, which the borrower pays, is the interest.

A systematic investment plan (SIP) can help a borrower prepay a home loan. Considering the above example, the borrower would make a monthly investment of Rs.7000 on starting a SIP. In 20 years, the total investment would amount to Rs.16.80 lakh, and a total corpus will be more than a crore in all probability. Even if the invested amount is deducted, there will be more than sufficient funds to cover the borrower’s interest payment.

Opting for a balance transfer

Another effective way to close a home loan early is by opting for a home loan balance transfer that involves transferring the outstanding loan amount to a different lender offering a lower interest rate. However, before opting for such a transfer, one must consider the following points regarding the new lender:

  • Must offer a lower interest rate compared to the current lender.
  • Should offer a top-up loan if the current lender denied the request for the same.
  • Loan processing fees and other charges which make up the loan transfer cost must not be high.
  • Must provide additional benefits and features.

Early and punctual repayment of a loan would boost the home loan eligibility of an individual in the future and help them avail several perks. Check out- calculate your eligibility for a home loan.

For instance, financial institutions provide pre-approved offers to eligible customers, which help in simplifying and accelerating a lending process. These offers are provided on various financial products like home loans, loans against property, and more. You can check your pre-approved offer by providing a few details such as your name and contact number.

Want to ease your financial burden by closing your home loan early? Choose any of these above-mentioned ways to repay your home loan EMI.