In 2019, RBI slashed the repo rate for the consecutive 5th time, in an attempt to convey the benefits of lower lending rates to the customer. With the growing demand for advances across India, a reduced rate is likely to fuel the demand even more and help borrowers repay the debt within its predetermined tenor.
As a result due to such situations, there has been a considerable rise in the demand for ways to make ease repayment of home loans.
Subsequently, thanks to the rising income amongst the middle-class society in India, an increasing number of customers are opting to close the home loan at an earlier stage. With the introduction of online tools like home loan repayment calculator, it has become even easier for an individual to build a framework of the whole repayment structure, allowing them to balance the debt pay-off without affecting their everyday expenses.
How can you close home loan early?
The most important aspect to consider here is to select the suitable home loan repayment options in order to close it early. In this regard, part pre-payment is one of the most preferred ways to repay your loan without incurring any additional charges. It will also reduce the repayment tenor, thereby reducing the total repayment amount.
Consequently, partial repayment is one of the safest options to repay the loan amount as well as reduce your home loan tenor and save Lakh in terms of accumulated interest over the years.
Although there is no restriction in the upper limit of how much you prepay from the outstanding balance, you can only do so after you have paid 3 home loan EMIs. You can choose to pay any amount of outstanding balance as per your convenience.
Tips To Consider When You Opt To Close Home Loan Early
Although closing a home loan early seems tempting, one has to follow some stringent rules to get the most of it and reap early repayments benefits. You can consider the following tips before you opt for such early closure.
- Charges for Prepayment
The lender may charge you an extra fee when you choose to pay-out of the tenor period and pay your loan at once. Hence, make sure you have a prior understanding of the same in direct consultation with the lender.
Using a home loan repayment calculator will help you get an overall view of the new EMIs and the amount prepaid along with the due amount.
- Credit Report
Make sure to keep track of your credit report as you repay the loan EMIs. Part-prepaying or foreclosing a loan might immediately lower your credit score to some extent (a result of closing a credit account), but it will increase overtime as your debt to income ratio decreases.
Regular repayment and prepayment is likely to increase your credit score remarkably, which will help you get access to loans with attractive interest rates in future.
Consequently, your credit score can determine your home loan EMIs whenever you avail advances in the future. You may also be beneficial in terms of availing lower interest rates as well.
- Comparison With Tax Benefits
You can claim tax benefits with your housing loan, although when you opt to repay the loan, the overall principle and interest amount reduces considerably. Hence make sure you compare both the tax benefits and your prepayment using a home loan repayment calculator and plan your disbursements accordingly.
Rest assured, use a home loan repayment calculator to save time and get the precise calculation of your new EMIs towards prepayment. Hence, following these tips, you can make the most of prepaying home loan as well as enjoy a significant improvement in credit score.
