The approval of the home loan is definitely a matter of jubilation, but it is always prudent to remember that if the EMI’s of home loan is not managed prudently then you might be listed in the list of defaulters of the bank, which might at the end hamper the credit score and also bank might send you notice. Therefore, in this article, we will discuss some smart ways in which the home loan EMI’s could be managed.
- Pay Importance on paying the EMI: Make sure that you pay the EMI within 2-3 days after the salary is credited to your bank account. Do not miss the due date of an EMI, because that would lead to the banks levy an interest as fine and surely no one would want that.
- Go for a shorter loan tenure: A shorter loan tenure ensures that the buyer can make loan repayment faster and if loans are paid faster it results in lower rates of interest.A buyer must first understand the concept that paying out a higher amount does not necessarily mean thatincrease in the effective interest rate. When you think of an increase the total loan tenure it only results in the absolute interest pay-out. And the amount you pay finally increases with the increase in loan tenor.
- Try paying a higher EMI:If banks increases the rate of interest on a home loan, then to reduce the burden of interest the customers should opt for paying higher interest rate. This way borrower can avoidthe total interest payment entire home loan duration. The best way to calculate EMI would be to keep the EMI below 50% of your net income. This way the borrower, if needed can step up and increase the EMI’s.Increasing the EMI helps to reduce loan tenure therefore ensuring that you can get rid of the loan as soon as possible.
- Make prepayments and pay in lump sum: The EMI for the home loan is made up of two parts: interest charged on the borrowed sum and the main amount. During the first few years of repayment, the payment made is more towards the levied interest and less towards the principal. So, during this time, it is prudent for the borrowers to make part prepayments by making the bestuse of your work bonus, salary hike, and other income. Most lenders like government and non-government financial institutions, allow the borrower to part prepay your home loan without charging any fees.
- Reduce Interest with extra EMI: If you get an option of paying 50,000/- per month with 9% p.a. for 20 years and 30,000/- per month with 9% p.a. for 30 year. It would be wiser if you chose the former one because if you are thinking of saving 20,000/- now, your concept is wrong because you will end up paying more than what you save in 30 years tenure.
Therefore, adopt these ways so that you could smartly and effectively manage your EMI’s.