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When you decide to take a home loan from the bank or NBFC, you enter a long-haul obligation, considering their repayment stretches up to 30 years. You not only avail tax benefits, but it also has some impact on the present and future finances. Therefore, you should aim to pay off the loan as soon as possible. You need to also carefully manage other related factors as well such as repayment tenure and monthly instalments.

If you wish to foreclose your housing loan, follow the mentioned tips –

  • Short tenure: When you take out the credit, the term plays a crucial role in closing the loan early. Always opt for term that is as short as possible as it allows you to repay the credit quickly. However, this could also mean shelling out higher EMI amount because the tenure has direct impact on your EMIs. When you use the home loan EMI calculator, one of the components is the duration. If you go for shorter tenure, the EMIs rise, and vice versa. Hence, evaluate your financial conditions and accordingly choose the mandate so that you can pay the EMIs without any hassle. The concern with longer tenure is the interest rates soar.
  • Increase EMI: Of all the loans available in the market, home loans come with lengthy tenure. It stretches up to 30 years. During this phase, the borrower’s income increases, especially for salaried professionals. If you are a salaried person or in a profession where your income could increase with time, try to raise your EMI steadily. Prepayment of your house loan through higher EMIs gets the debt off your shoulders.
  • Prepayment: Doing so time to time is a quick way to reduce the EMIs as it decreases your tenure. This also helps consumers save on the overall interest payment. Earlier, lenders had prepayment charges in place and foreclosure penalty on floating interest rates. However, according to RBI directives, NBFCs and HFCs cannot levy penalties for prepayment of the loan.
  • Balance transfer: Another viable option to close the home loan is opting for a balance transfer. Here you can move your outstanding amount to another lender for lower interest rates. Nevertheless, consider the following aspects –
  • Compare the interest rates with the current one being offered
  • The loan transfer expenses should not be higher than processing fees and other such charges
  • There should be the provision of top-up loans if the request for the same were not accepted by the existing lender
  • Must provide additional features and benefits

If you do a balance transfer in the initial years, you save substantially on the interest pay-out. In such scenarios, avoid extending the tenure of the credit. Borrowers generally pay the interest amount during the initial years of the credit. A housing loan balance transfer does not come handy if you opt for lengthy tenure again. Keep the same mandate as you did with the previous lender. You save on the interest amount pay-out.

If you under financial stress, consider extending the loan duration, as it brings down the overall EMI burden.

Author RudraRaghavan

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