What Is a Home Loan?
An amount obtained from a bank or financial institution for buying a house or residential property is known as a Home Loan. The loan can be used for a constructed house as well as one that is under development. This money can be obtained from both NBFCs and banks. These loans have different interest rates, which depend on your credit score. You should choose the best Housing Loan in India based on your requirement. Banks and financial institutes in India offer different types of Home Loans. Some of the most popular Home Loan Types Are Home Purchase Loans, Home Reconstruction Loans, Home Loan Balance Transfers, And Home Extension Loans.
How Can We Repay It Faster?
There are several ways to repay our loan faster. Some of these are as follows :
Make a Large Down Payment
Making a large down payment reduces the interest amount. It means you’ll have affordable monthly installments. With affordable EMIs, it will be easy to manage the repayments without compromising your daily needs. Plus can do part-payment to reduce the outstanding balance and pay off the loan early.
Select Your Loan Term Wisely
Choosing a shorter loan term and paying immense EMIs allows you to repay the debt faster. A shorter loan term means a reduced interest amount. However, keep in mind that picking a shorter loan term increases your equated monthly installment amount.
If you cannot make timely EMI repayments owing to any uncertainties, charges will be levied for late payments, which will be reflected in your credit score. Thus it is essential to select the correct life term. You can choose a lengthier loan term with an amount you can easily afford and pre-pay if you have extra income.
Begin a Few Part-Payments
When you make a few part-payments within the term of your House Loan, the principal amount owed and subsequent EMIs will be reduced automatically. When your EMIs decrease, you can pay them on time and complete your House Loan repayment in a shorter amount of time.
Boost the Equated Monthly Installment
The loan term can be reduced by increasing the EMI amount if your income or salary increases. It is a frequent method of repaying a Home Loan quickly, particularly among salaried persons. Even a modest increase in your EMI might drastically shorten the term of your loan.
Do Not Default on Your Monthly EMIs
When you fail to pay your EMI, it will affect you in various ways. The delay will result in a 2% penalty interest rate plus relevant taxes. Your CIBIL score will fall, and your credit report will reflect the missed payment.
Also Read: HOW DOES A HOUSING LOAN HELP YOU SAVE TAX?
If your CIBIL score falls in the future, you may find it difficult to obtain credit. When a lender conducts a credit check, your loan applications may be refused in the future.
Link Your Home Loan with Your Bank Account
When a Home Loan is approved, a current account will be opened in a few institutions, and both will be linked. Your interest cost will be reduced if you retain money in this current account.
The interest liability on your Home Loan will be reduced to the extent of the surplus cash in your current account. This current account allows you to deposit and withdraw funds whenever you desire. The interest on a House Loan is calculated by subtracting the outstanding loan amount from the current account balance.
Home Loan Tax Benefits
On repayment of the Housing Loan, we can claim the Home Loan tax benefit in the form of a deduction. On the principal part of your Home Loan, the total income tax benefit u/s 80C is subject to a maximum of Rs. 1,50,000/-. And on the interesting part of your Home Loan repayment, you’ll get Rs. 2,00,000/- deduction u/s 24(b).
If you pay back the loan fast, it will help you save money, which you may use to fulfill essential life goals such as saving for retirement, taking a family vacation, etc. Repayment of debts feels good and relieves financial stress.