Buying a home is a significant milestone, but it also comes with the responsibility of repaying a substantial home loan. Planning your home loan repayment effectively is crucial to managing your finances and achieving your homeownership goals without stress. In this article, we’ll explore seven practical home loan tips to help you plan your home loan repayment schedule and stay on top of your EMIs.
1. Calculate Your EMIs Beforehand
Before applying for a home loan, it’s essential to calculate your Equated Monthly Installments (EMIs) to understand your repayment obligations. Use an online home loan EMI calculator to input your loan amount, interest rate, and loan tenure to determine your monthly payments. This will help you assess your affordability and plan your budget accordingly.
For example, if you take a home loan of ₹50 lakh at an interest rate of 7.5% for a tenure of 20 years, your EMI would be approximately ₹37,153. Knowing this figure in advance allows you to make informed decisions and plan your home loan repayment schedule.
2. Opt for a Longer Loan Tenure
A useful home loan tip is that choosing a longer loan tenure can help reduce your monthly EMI burden. While a shorter tenure means paying less interest overall, it also results in higher EMIs. If you’re starting out or have other financial commitments, opting for a longer tenure can provide some breathing room in your monthly budget.
Consider this scenario: For a ₹50 lakh home loan at 7.5% interest, the EMI for a 15-year tenure would be ₹44,941, while for a 20-year tenure, it would be ₹37,153. The longer tenure offers a more manageable monthly repayment amount.
3. Make Prepayments Whenever Possible
Prepaying your home loan can significantly reduce your interest burden and help you become debt-free faster. Whenever you have surplus funds, such as annual bonuses, tax refunds, or inheritance, consider making prepayments towards your home loan principal. Most banks allow prepayments without charging any penalty.
Here’s an example to illustrate the impact of prepayments:
| Loan Amount | Tenure | Interest Rate | EMI | Total Interest (without prepayment) | Total Interest (with ₹5 lakh prepayment annually) |
| ₹50 lakh | 20 yrs | 7.5% | ₹37,153 | ₹39,16,720 | ₹27,28,977 |
By making an annual prepayment of ₹5 lakh, you can save nearly ₹12 lakh in interest over the loan tenure.
4. Maintain a Good Credit Score
A home loan tip to remember is that your credit score plays a crucial role in determining your home loan eligibility and interest rates. A higher credit score indicates better creditworthiness, making you eligible for lower interest rates and better loan terms. Regularly check your credit score and take steps to maintain a good score by paying your bills on time, keeping credit utilisation low, and avoiding multiple loan enquiries.
5. Explore Home Loan Balance Transfer
If you find a lender offering a lower interest rate than your current home loan, consider opting for a home loan balance transfer. This involves transferring your outstanding loan amount to the new lender at a reduced interest rate. A balance transfer can help you save on interest payments and reduce your EMI burden.
However, keep in mind that balance transfer involves processing fees and other charges. Assess the overall savings and factor in the costs before making a decision.
6. Increase Your EMIs Periodically
As your income grows over time, consider increasing your EMI payments gradually. Even a small increase in EMI can make a significant difference in reducing your loan tenure and interest outgo. Most lenders allow borrowers to increase their EMIs without any additional charges.
For instance, if you increase your EMI by just 5% every year on a ₹50 lakh home loan with a 20-year tenure at 7.5% interest, you can reduce your loan tenure by approximately 1.5 years and save around ₹3.5 lakh in interest.
7. Create an Emergency Fund
Life is unpredictable, and financial emergencies can arise at any time. To ensure that you can continue repaying your home loan EMIs even during tough times, it’s crucial to build an emergency fund. Aim to save at least 6-12 months’ worth of expenses, including your EMIs, in a separate savings account or fixed deposit.
Having an emergency fund provides a safety net and prevents you from defaulting on your home loan repayment schedule during unforeseen circumstances such as job loss, medical emergencies, or unexpected expenses.
Summing Up
Planning your home loan repayment is essential for a stress-free homeownership experience. By calculating your EMIs beforehand, choosing an appropriate loan tenure, making prepayments, maintaining a good credit score, exploring balance transfer options, increasing your EMIs periodically, and building an emergency fund, you can effectively manage your home loan repayment and achieve your financial goals.
Remember, every small step counts when it comes to managing your home loan. Start implementing these home loan tips today and take control of your home loan repayment schedule. For personalised assistance and competitive home loan offers, consider exploring the home loan options available at Airtel Finance. With their expert guidance and flexible repayment options, you can confidently navigate your home loan repayment plan.
FAQs
- What is a home loan repayment plan?
A home loan repayment plan is a structured approach to repaying your home loan, taking into account factors like EMI amount, loan tenure, prepayments, and interest rates.
- How can I calculate my home loan EMI?
You can calculate your home loan EMI using an online EMI calculator. Simply input your loan amount, interest rate, and loan tenure to determine your monthly repayment amount.
- What are some effective tips for planning home loan repayment?
Some effective home loan tips include calculating EMIs beforehand, opting for a longer tenure, making prepayments, maintaining a good credit score, exploring balance transfers, increasing EMIs periodically, and creating an emergency fund.
- How does my credit score impact my home loan repayment?
Your credit score influences your home loan interest rate and eligibility. A higher credit score can help you secure lower interest rates, reducing your EMI burden and overall interest outgo.
- What is a home loan balance transfer?
A home loan balance transfer involves transferring your outstanding loan amount to a new lender offering a lower interest rate, helping you save on interest payments and reduce your EMI.
