Once a home loan has been sanctioned, the next step involves managing one’s finances properly so that one can make timely payment of the EMIs. A little bit of careful planning can prevent the home loan from becoming a liability and eventually one can save enough to fulfill all other financial obligations, without having to compromise on anything. Here are some ways to help with that:
- Paying off the EMIs should always be a priority, so that one does not default on the payment and attract penalties, which will only increase the cost of the loan. To do so, schedule your EMI payments close to the payday, so that you have sufficient balance in the account to avoid default. The rest of the balance can then be used for other aspects of your life like paying for utility bills or planning for entertainment.
- Prepay your principal loan amount as much as you can and if that means comprising on a thing or two, do that. So in case you find yourself in possession of some extra cash, like getting a bonus at work, or with the maturation of the FD, use it to prepay a part of your loan. That reduces the principal loan amount, and likewise the interest balance that you were paying on it. This will help save a considerable amount of money in the long run as you keep saving interests. A online home loan EMI calculator will tell you exactly how much money you were initially paying for your EMIs and how much would you end up saving.
- You can also save considerably if you choose a shorter tenure for loan repayment rather than a longer tenure. A shorter tenure would mean you have to pay high EMIs each month, but in reality, the total amount paid towards interest would be much lower than if you choose to pay smaller EMI amounts over a longer tenure. This might mean you would have to cut down on certain unnecessary and secondary expenses but eventually, you would save a lot.
- Floating rate term loans usually do not have any prepayment charges and by just paying one extra EMI every year, one can considerably save a lot in the long run. The overall outstanding loan amount gets reduced slowly and steadily and the interest to be paid on it also starts reducing. This is great for those who cannot afford to make bulk prepayments because the money is needed to take care other personal or financial commitments, but it still helps in paying off the loan faster and in a much more affordable manner.
- Opt for home loan balance transfers if you come across another lender who charges lower home loan interest rates. Lenders often lower their rates at various intervals or in keeping with the market rate and one can always transfer their loans with a nominal processing fee. This will help in saving a lot of money paid towards the interest. NBFCs like Bajaj Finserv have excellent home loan balance transfer options that are of great help to home loan borrowers looking forward to reducing their home loan EMIs.
It is always a good a good idea to check one’s home loan eligibility before one applies for a loan amount so as not to be rejected by the lender. Calculate how much loan amount you are eligible for based on your income, so that your salary is enough to cover the EMIs of the particular loan amount. That way you could make your application with much more confidence.
