Are you wondering about how to clear home loans faster in India? If the answer is yes, we have some simple tips to help you with it ! Loans can be a burden both monetarily and mentally. The constant anxiety of clearing it, the interest that one has to pay and many other factors make loans a tiresome burden. But taking a home loan is the quickest way to be able to own a home without having to save every penny needed for this purpose. Here are some simple tips on how to clear home loans faster in India.
• Before you take a loan, it is important to understand how much you will be able to pay back without comprising on your other needs. Setting a budget will not only narrow down your search for your home, it will also help you understand how much you need to set aside each month for repaying the loan, duration of the loan, etc.
• Once you have an overview of your budget, location, size of the house, etc. in place, it is imperative to compare multiple options that you have to obtain a loan. Different banks and organisations offer different rates of interest, tenure and other specifications and it is extremely important to compare, understand and analyse which one works best for you both immediately and in the long run.
The credibility of the bank, their relationship with customers, reliability, etc. has to be carefully scrutinised before choosing a money lender for your housing loan. You can use mortgage calculators to understand how much home loan you can shoulder without it becoming a burden. These calculators will also help you in choosing a loan scheme/product that is best for you. They also help you calculate your expenses, saving, etc. thus helping you get a clear picture of your finances.
• Now that you have the above factors sorted, it is important to manage your funds. Making a budget of how much you need to spend, and chalking out a save and spend plan will help you manage your funds and prevent any unwanted complications. One may have to cut down a few expenses during the tenure of the loan, and one must take the call right in the beginning about which are the expenses that he will be letting go for the period during which he will be paying the loan.
• One of the easiest ways to clear home loan faster is by paying higher EMIs. Opt for an EMI amount that will help you clear out the loan in a shorter period of time. This will also help you save certain amount that may be directed towards interest to the bank.
• Alternate investments are also a good way to make some money in order to pay back a higher amount every month. Invest in some other reliable source of additional income that you can use to cover your expenses and pay a bigger amount towards your loan.
• Partial pre-payment is a another way to lower your loan tenure. The longer you take to pay the loan amount, the more loan interest will be charged. There are many advantages of partial pre-payment one being that most banks do not charge any fee for this facility, and the pre-payment amount can be as low as Rs. 10,000. Apart from this, a good bonus, handsome gain in stocks, additional income from property sold, any tax-saving investments or fixed deposits that are maturing, gifts from parents or family, rental income and many more such one-time incomes can be used to make partial pre-payment. This is one of the most effective ways to clear home loans faster in India.
• Banks often charge interest rate on monthly, quarterly or daily basis. Under the daily basis scheme, your loan interest is calculated based on the previous day's outstanding balance. While with quarterly and monthly system the interest is calculated based on the principal amount at the end of three and one month respectively, which means it takes that much longer for a reduced principal. Hence, it is best advised to opt for the daily basis as the principal amount to be paid will be reduced on an everyday basis.
• Different banks have different rates of interest for the home loans they offer. The rate that they offer varies at different stages, and there are certain offers during festivities, etc. Some banks tend to keep varying the interest rates citing various excuses and it is best to stick to a bank with the least fluctuations. You can refer online portals, talk to friends and get multiple opinions on different banks and how their policies are before making your choice.
If at any given point you feel one bank is giving a lower rate of interest as compared to your current bank, you can shift your loan to the bank of your choice. This can be done through the 'Balance Transfer Schemes.’
Under balance transfer, the entire/major unpaid principal of home loan amount is transferred to the bank of your choice for a lower rate of interest. But one should make sure that they don't keep switching the banks often or for minor interest rate differential as every time one shifts to a different bank, one has to undergo the entire process of loan appraisal, underwriting processes, technical and legal paperwork all over again. They are also charged a nominal fee by the lender for this facility. Hence, one must only shift banks when there is a really good reason to do so.
• Lastly, the most important factor to keep in mind is consistency. It is important to pay your installments every single month without fail. Failing to pay regularly is one of the biggest hindrances to clearing a home loan fast.
These simple tips on how to clear home loans faster in India will help you tackle your home loan in a more a relaxed manner without making it a burden for you.
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