Effective Ways to Repay Your Home Loan Quickly and Reduce Interest

Home Loan is a secured loan provided by the financial & non-financial banks which is used to purchase a new home, second hand home, build a new home. It is an asset which has long term liability i.e it takes 15 – 25 years to repay the entire loan amount.

Learn how to pay off your home loan faster with strategies like boosting EMI, part payments, balance transfer, and more. Save on interest and reduce tenure.

We end up losing thousands of amount on the interest by paying only the minimum EMI on the home loan. Here are a few strategies to reduce this financial burden and repay the loan faster, repaying the home loan in a faster & efficient way.

Down payment: The home loan applicant has to pay 10-20% of property value as a down payment even though the borrower applies for the housing loan.

To reduce the tenure and EMI amount, the applicant can choose to pay more percentage on the down payment. (Instead of 20% applicant can opt for 30%)

Part Payment: The applicant can choose to pay a certain amount of money annually or bi-annually which reduces the principal amount.

Using Matured Payment for Part Payment: You can pay the extra money you receive such as a bonus, or your savings such as RD or chit fund matures, by paying it towards your home loan.

Balance Transfer (BT): The borrower can choose to do BT, after a period of six months or a year from the present bank to another bank.

However, when considering BT for a home loan one should consider certain important factors like interest rate, fixed or floating interest, processing charges to the new bank. If the interest charges are less and the interest is a floating interest that will be a benefit for the borrower.

Minimizing the tenure: The tenure of the home loan is fixed by the age and salary of the applicant. If the applicant chooses to reduce the tenure, he/she will end up saving on both the interest & principal amount.

But an applicant should also consider the fact that he/she should be able to pay the EMI amount, because reducing the tenure will increase the EMI amount.

Boost your EMI Amount: Boosting the EMI means gradually increasing the monthly payment by adding an extra amount, such as ₹1000 or ₹2000. By practicing this, you consistently contribute more towards your loan, which in turn reduces the principal and lowers the total interest paid over time.

Augment one extra payment annually: Augmenting one extra EMI annually significantly minimizes your principal amount which helps in lowering the tenure of the home loan. This method doesn’t disturb the monthly cash flow and it ensures repaying the home loan at a faster pace.

In general, when an applicant chooses to take a home loan, they have to consider the strategies which help in repaying the home loan earlier than the actual tenure. These strategies reduce the financial burden, helps in shorter tenure, saving thousands of rupees on the interest.

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