Tips to Manage Your Home Loan EMI’s in an Efficient Manner

Getting a loan for your dream home is not a tough job if you have the savings for a down payment and a good credit score. A substantial income can also get you a decent amount as loan. But, when it comes to the repayment of the loan through EMIs, it can become tricky. You can calculate the EMIs using a home loan EMI calculator and pay these meticulously and in an organized manner for a long time. So, you can surely keep the following tips in mind for stress-free loan repayment.

 

1. Save Up Before You Take a Loan

You can take up to 90% of the property value as loan depending on your eligibility criteria. If you have saved up enough for the down payment, your loan requirement is less and so is the likely stress going to be. You should try to take as small an amount of loan as possible. Use your savings and your provident fund to make the down payment for your home. As per law, you can take out up to 90% of the amount in your PF to fund it. A lower amount taken as loan means lower EMIs to be paid over the years.

2. Choose The Best Rate of Interest After Research

Different lending institutions have different interest rates on offer. Within each, there are different plans depending on the target segment. It is advisable to look at all the plans and see which one offers the lowest interest rate for the target segment that you belong to. If you have worked out the loan amount, calculate the EMI for the various plans that you look at and check which one suits you the best.

Read More: How Does Housing Loan Interest Calculator Work?

3. Maintain a Good Credit Score for Better Interest Rates

A good credit score helps you get a better deal on interest rates. The interest rate is the factor that decides how much extra amount you would end up paying for your dream home. It is also affected by the tenure, but that choice lies with you.  Home loan interest calculator tells you how much interest you pay for every instalment. It calculates the interest based on the outstanding principal. As the principal amount reduces, the interest amount also reduces.

4. Use Home Loan EMI Calculator

For every combination of amount, interest and tenure, you can calculate the EMI value instantly with the home loan EMI calculator. You can then compare the various EMI values and arrive at the optimal value for you. Along with the EMI, you should also pay attention to the total amount of interest you are required to pay over the years. You can get these values also when you calculate the EMI. The EMI value has two components: one is the principal and the other is the interest. Initially, the interest component is high, which reduces with every instalment and the principal component increases accordingly.

5. Choose Higher EMI for Quick Loan Payment

A higher EMI shortens the tenure for payment and also the interest amount paid and hence is a preferable option, provided it fits in your budget. Choose the maximum EMI that you can afford amongst all the options available. A shorter EMI stretches over a long period of time and as the principal cleared each time is small, you would end up paying larger amount as interest.

6. Manage Your Expenses

Once the EMI and the loan details have been worked out, you have to be consistent with the payments. If you default the payments, you could be heavily penalized for that. Work out your household expenses before finalizing the EMI and keep it at a number that can be comfortably taken out of your monthly savings rather than stretching it and then finally affecting your monthly budget. As your income as well as expenses increase, your budget should be managed so as to not affect the EMI payments.

7. Make Prepayments/Foreclose

Whenever you have surplus funds, use them for early payments on the loan. You are allowed to make these from the second instalment onwards depending on the lending institution. When you make these payments, you can rework your payment schedule by shortening the tenure and finishing the loan early. The other option is to keep the tenure same and reduce the amount per EMI. The similar rules of interest will apply as before i.e. shorter tenure means lower amount of total interest paid. Once again, you can make use of the home loan EMI calculator India, which is applicable to all banks as long as you know the variables.

8. Claim Your Tax Benefits

When you take a housing loan, you are entitled to tax deductions on the interest payments made. Use a housing loan EMI calculator to figure out how much interest you would pay for the financial year and save on tax. It is a very important saving and hence you should stay updated with the laws governing the tax benefits on home loan. The tax you save covers up for a lot of interest that you pay over the years and hence reduces the final cost of your dream home

Before you take a housing loan, you should plan out all the details of repayment to avoid any stress. It is possible to get through the process smoothly if you have planned for some emergencies as well. All your savings should be utilized intelligently to get the maximum benefit.

Read More: Plan Your Home Loan EMI in Advance with ICICI Home Loan EMI Calculator

 

Author Since: Jan 17, 2019

Anoop Bansal, a professional Chartered Accountant based in the National Capital - Delhi. I have worked for the top-notch Indian and International banking firms for the past 10 years. Currently, I work at emi-calculator.loan blog and a financial consultant for different SMEs in India. Follow me on Facebook, Twitter and Linkedin for more information.

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