Property prices soared by a whopping 38% across seven major Indian cities in the last decade. This rise in cost has led to the increased popularity of housing loans as well. However, blindly availing of such credit can create a long-term financial strain on borrowers.
One of the concerning factors post loan approval is EMI payment. If not planned and carried out efficiently, you might encounter the risk of default, and hefty penalties, thereafter. Below are the five ways you can manage loan repayment besides using a home loan EMI calculator to know your monthly instalment and the overall cost of a loan beforehand.
Lay out a plan and stick to it
Borrowers must formulate a financial plan for the entire repayment tenor. Therefore, borrowers must start chalking out an income versus expenditure tally to effectively schedule EMI payment. What can aid in determining these monthly payments is a housing loan EMI calculator. Timely repayments will not only help boost your credit score but also save you from hefty penalties or the risk of getting your property confiscated. The several benefits of calculating EMIs before taking a home loan also lets you plan and set aside a contingency fund for future emergencies.
Make a larger down payment
The RBI has mandated financial institutions to sanction a maximum 80% of property value as funds. Some lenders offer even lesser. Borrowers must bear the remaining property cost from their personal resources, also known as a down payment. It is always advisable to make the maximum down payment possible for an individual. This will reduce the home loan requirement, and aid in cutting down interest payment at the same time. Once you get an estimate of your monthly instalments using a home loan EMI calculator, plan your down payment accordingly to get more affordable EMIs.
Shorten the repayment tenor
While a longer tenor helps distribute repayment into smaller EMIs, it also adds to the interest component over time. Shortening your fund repayment tenor means you are bearing interest for a shorter period and hence, saving on the additional payment. Paying a larger EMI amount over 15 years might look intimidating at first glance, but smaller EMIs over 30 years will only cost you more in the long run.
One of the ways to reduce home loan tenure and EMI is by making prepayments. Borrowers can choose to channel the cash influx from a salary raise, or bonus into paying an extra EMI every year. You can also cut down on luxuries and other such costs to make way for more repayment whenever possible. This can help individuals end repayment tenor and get off the burden of borrowed funds faster, thus saving on borrowing cost predicted by a home loan calculator.
Refinance to lower interest rates
If your home loan EMI payment starts to strain your monthly budget, you can always shift your outstanding balance to lenders offering lower interest rates. Online EMI calculators also work as a home loan interest calculator. Borrowers can use these to calculate interest payments for affordable lenders and pick the best. Lower interest rates mean lower EMIs. Note that this procedure entails certain additional charges. Therefore, proceed only after calculating your significant net gain.
Many lenders also offer pre-approved funds to facilitate prompt disbursal of financial products, including housing finance. Check your pre-approved loan offer with the concerned lender before proceeding with the application process by providing your phone number and name.
Overall, prioritise your fund repayments as estimated by a home loan EMI calculator. Plan repayment dates close to payday to avoid lack of funds. Skipping a monthly payment for other amenities is not a desirable outcome since it affects one’s credit profile adversely.