Paying Home Loan can be mentally as well as financially challenging as a huge chunk of your income goes in repayment of your debt and you have to manage the entire household on the remaining income. But since having a roof over your head is a basic necessity, availing a Home Loan is the best possible option to fulfill this necessity. But there are ways which can help you manage your finances better and help you become financially stable.
Here is a list of options to make better savings:
1. Pay Higher EMI
One of the best ways to save some money is to pay a slightly higher EMI than what is required by the bank. So if you are required to pay INR 20,000 monthly, make it a point to pay more than that amount. The extra amount that you pay goes towards the repayment of your principal amount. As the outstanding principal amount comes down, so does the interest that you pay. This also helps you close your loan before the original tenure of the loan.
2. Using the Bonus to Pay the Debt
It is possible that you might get a lump sum amount from various sources like salary bonus, the windfall from the stock sale, maturing deposits or policies, etc. Instead of spending this money on unnecessary things, use this money to prepay your loans and lower the tenure of your loan. This will also reduce the interest amount substantially. The banks allow prepayment of your Home Loan and generally no additional charges are applied.
3. Home Loan Interest Rate
Reserve Bank of India keeps increasing or decreasing policy rates and banks change their base rates accordingly. This affects the EMIs too. So the interest rate offered by banks may change. The best time to opt for a Home Loan is when the interest rate is at its lowest. That way you can keep paying the low-interest rate for the entire tenure of your Home Loan.
If you opt for a floating interest rate Home Loan, the interest that you pay will keep varying. A Home Loan with a floating interest rate is when the rate of interest that you have to pay varies according to the current market conditions. This type of loan is tied with a base rate and it also has a floating element. When the base rate is revised upwards or downwards, depending on the market condition, the floating interest rate is also revised accordingly.
Hence it is possible to save some money while repaying your Home Loan. The only thing that you need to keep in mind is to use your money sensibly and not to spend it carelessly.
Aman Khanna is an experienced financial advisor who is well known for his ability to foretell the market trends as well as for his financial astuteness. He has an MBA in finance from Toronto University as well as years of experience delivering seminars on sound financial practices and debt management.