5 Ways to Save Money on Home Loans

By Cioreviewindia

5 Ways to Save Money on Home Loans

Paying off a Home Loan could be a pretty cumbersome affair. After your house loan gets sanctioned, what you have to next is effective management of the EMIs every month. It is very important to do your research well on this matter and compare housing loan interest rates of different banks. Here is a list of 5 ways which could help you manage your home loans efficiently:

1. Try Using Lump Sums for Repayment:

The bonus or the proceeds of maturity from the insurance policies must be made use of to prepay some parts of your home loan time and again. If it becomes possible for you to make more of such lump sum payments, the tenure of your loan could possibly come down. It would be a proper situation to have made the payments in lump sum in the early years of your home loan tenure when the principal is pretty high.

2. Try to pay at least one extra EMI every year:

This might be pretty tough in the initial years but it pays off in the long run. Usually there is no prepayment charge for floating rate term loans. If you prepay an extra EMI each year, then the principal outstanding amount can reduce considerably. Over the entire loan tenure, the impact would be great. Also, your lending bank is less likely to complain on the fact that you pay a bit of extra EMI every year.

3. Consider paying more to cut the interest outgo:

If you choose a longer tenure to repay the loan with a lower amount of EMI per month, you could actually end up paying more in the long run. You would be paying more interest on the out go. So, it is better to choose a higher amount of monthly payment every month for shorter loan tenure. You must keep in mind the prepayment charges and all the other charges which go in hand while preclosing your home loan.

4. Make payment of EMIs a priority:

If you consider paying your EMIs on time, it would end up boosting your creditworthiness. You should plan accordingly to your lifestyle. It would be recommended that you schedule your EMI close to your salary date in order to ensure enough funding in your account. Minimize the chances of a default due to lack of funds in your account. If you skip an EMI, that would lead to stiff and strict penalties from the lending institution. This would negatively impact your credit score. A prolonged default could lead to your home being attached with the lender.

5. Consider transferring the balance of your home loan:

The Home Loan Bank transfer is a method in which a particular bank takes over your existing home loan from the current bank. If you find a lender offering lower interest rates, then do the switch. This opportunity would allow you to save on interest rates. Home Loan bank transfer is pretty easy to obtain. The entire switch will need a loan appraisal process, redoing all the paperwork and payment of a nominal fee.

In order to save on home loans, you need to manage your investments properly and smartly handle your EMIs. Otherwise you may land up with overheads which were unanticipated. The above enlisted tips may prove helpful to you and save you a decent amount of interest over a long term.

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