EMI is usually one of the largest spends for individuals on a monthly basis. With rising interest rates leading to higher EMIs or longer payment period, it makes the situation even more difficult. So, people look for ways to finish the home loan quickly. Here are some ways one can repay a home loan faster by making changes in the payment cycle;
Part payment at least once a year
One can make a lump sum part payment of the home loan at least once a year. A payment of 20-25% of the loan amount will reduce the home loan principal amount significantly and will then reduce the EMI amount or the loan repayment period. Borrowers can plan making such lump sum payments at least once each year, maybe when they receive large payments, such as an annual bonus.
A slightly higher EMI
To start with, a borrower should try and choose a lender who offers the lowest interest rate and hence, a lower EMI. To add to that, one can still choose to pay a slightly higher EMI to reduce the home loan payment period. Borrowers can also choose to increase the EMI, by say 10% each year.
Choosing a lower payment tenure
The borrower can choose a lower tenure for payment. This will lead to a higher EMI, but will help the borrower reduce the interest burden on the loan.
Points to note
- It is important to not miss a single EMI payment as this may attract a penalty. And it can also affect your credit score negatively and make it difficult to avail further loans.
- Tax benefits are available for interest and principal payments, which can help the borrower save money that can be used to make part payments.