Home loans are a long-term financial commitment with the repayment tenure till 30 years. The home loan is also generally a big-ticket size amount, which tacit you have a long-term liability to repay. Needless to say if you want to be debt free you have to repay your home loan early. But how to clear home loan faster? Read through to find out the proficient ways to pay off home loan faster.
Tips To Pay Off Home Loan Faster
The magic to pay off home loan quicker starts by saving money. Which implies you have to cut down your unwanted expenses and save to prepay your loan amount. There are no definite rules on how to save. You have to create your own magic to learn the art of savings and to cut down your expenses to become debt free as early as possible. Expenses differ from person to person and so do the ways of controlling it. Here are some of the common ways of doing it for paying off home loan early.
Quickest Way To Pay Off Home Loan
- Avoid Life’s Luxuries
Just try to avoid repeatedly spending money on the things you don’t need. These tiny expenditures add up over time. Take stock of what you spend money on and think about where you could make cuts. You may start with:
- Curbing monthly overhead expenses such as, shopping, movie tickets, partying, grand ceremonies, etc.
- Postponing your holiday trips, long vacations and travel plans.
- Limiting your credit card usage.
2. Utilize Other Incomes to Prepay the Loan
Use additional incomes such as bonus, incentives, salary increments, etc. and monthly surpluses to prepay your loan amount. If there are many working hands in a family, you may utilize partial income of the other family members to prepay the loan. Utilize profits on your other investments in FD, RDs, stocks and mutual funds to pay off your home loan amount. You may also create additional source of incomes to be debt free at the earliest by:
- Renting out your other property/properties and generating the rental income.
- Take up an additional job as a freelancer or take up a part time job.
- If you have saved the money in FDs, use the FD investment to pay off your home loans. FDs earn you merely 4% annual interest, but in home loans you pay a minimum interest rate of 6.80%. It is therefore not wise to invest and block the money for lower earnings on interest.
- Claim the various tax exemptions available on the home loan principal and interest amount and reduce the cost of your housing.
>> Claim up-to Rs.1.5 Lakhs (Including one time stamp duty and registration cost) under section 80C for housing loan principal repayment.
>> Claim up-to Rs.2 Lakhs (for self-occupied properties), No limit (for let-out properties) under section 24(b) for interest on housing loan &
>> Claim additional home loan interest deduction for first time home buyers for Rs.50,000/- under section 80EE.
CLICK to read the complete article on Income Tax Benefits On Home Loan.
3. Avoid Additional Borrowings
Avoid taking fresh loans such as personal loans, car loans, mortgage loans, top-up loans etc. unless it is important. Additional borrowings means additional liability and additional EMIs. Avoid piling on the debts.
CLICK to know the 5 astute ways for managing the multiple loan repayments.
4. Apply for a Loan Amount Which is Within Your Reach of Repayment
Don’t get tempted applying for a higher loan amount, even if you are eligible for as per your income earnings. With low home loan amounts the repayment becomes much easier.
5. Choose a Lender With Lowest Home Loan Interest Rate
Apply with the lender that offers you a lowest interest rate for home loan. With reduced interest you will be able to pay off your loan faster. If your existing home loan rate is high, speak to your lender for the rate change, alternatively you may also refinance your home loan– switch to a lender who provides you with the best rate. (Also read –Things to Know Before Applying for a Refinance). Make sure you compare the other factors while choosing among the lenders, such as home loan processing fees, closure charges, closure conditions, prepayment charges, other charges, etc. which might make your home loan costly. Read what are the costs involved in availing a home loan.
6. Choose a Lender Who Allows Maximum Prepayments
Choose a lender who does not have pre-conditions for home loan closures. Wisely choose among the lenders who allows you to make maximum pre-payments in a month and in year over the lenders offering you with lowest housing loan interest rates.
7. Make Higher Down Payments
Keep your own contribution high for purchasing your dream house. This insinuates you have to apply for a lesser loan amount, as a result, the interest amount will get reduced and so does your monthly installment amount.
8. Go for Shorter Loan Tenure
Even though the tenure and the EMIs are inversely related to each other i.e. the longer the tenure the lesser are the EMIs and vice-a-versa, remember the longer the tenure the more is the interest you pay to the lender. Even though the EMIs are affordable for the longer tenures, you land up paying double the principal amount or at times even more than double for the longer tenures. Therefore if you can afford to pay the higher EMIs try to keep the tenure short for the home loan or make maximum prepayments towards your home which can reduce your home loan tenure.
9. Make Timely Repayment
Make timely repayment of your utility bills, credit cards bills, etc. as well as your monthly instalments. Avoid delayed payments. Don’t miss your home loan EMIs. Delayed or missed EMIs encounter penalties and also affect your CIBIL score, making it difficult for availing additional credits/ loans in the future.
Rather, pay more than your fixed EMI amount. The amount paid over and above your EMI amount reduces your principal amount and hence reduces your interest outgo.
10. Opt for Money Saver Home Loan Product
You can opt for the smart home loan product, wherein you can park your access funds in the bank accounts and save the interest component. The interest rate is charged on the outstanding principal amount i.e., the principal loan amount – (minus) the excess funds parked. To know more on the money saver home loan product contact Loanfasttrack on 9321020476.
So, there you have it, 8 smart strategies that can speed up your home loan repayments. Although you may not be able to use them all but we are sure few may prove to be useful, apply to your situation and repay your loan ahead of time and save on the total interest on prepayment of home loan.
Please remember this information is general in nature and it is advised that you seek professional advice before making any financial decisions. Get professional advice free of cost, contact Loanfasttrack.
Loanfasttrack is a Mumbai based loan provider company since 2015 offering loan services in Mumbai on– housing loan in Mumbai, mortgage loan in Mumbai, personal loan in Mumbai, business Loan in Mumbai, unsecured business loans,home loan transfer, top-up loans and loan transfers. Loanfasttrack is a direct sales associate with leading banks namely, ICICI Bank, HDFC Ltd, Canara Bank, Citi Bank, Piramal Housing Finance, etc.
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