Home loans are one of the most convenient and secure funding options available for individuals looking to buy their dream home. They come with an extended tenor, making it easier for borrowers to pay off the whole amount easily. Nonetheless, it also means that borrowers are required to pay a substantial amount as interest over a long period which can be financially draining.
Hence, applicants should always look for ways to close their housing loans early. Here are some of the approaches that they can follow
Steps to Help you Close your Home Loan Early
1. Pay a higher amount as EMI
Borrowers can consider paying a higher amount than the actual EMI every month, which will lower the tenor and overall amount due. It will enable one to close his/her loan account quickly.
2. Make partial prepayments whenever possible
Individuals should also make part prepayments on their Bajaj housing loan online when possible to close it quickly. It will help to lower the outstanding loan amount as well as total interest payable. Furthermore, when borrowers prepay a part of their loan, it either shortens the repayment period or reduces EMI.
Nonetheless, one should keep in mind that the part prepayment amount should be thrice the EMI. One can also use an online calculator to check the impact of prepayment on their housing loan. The following information should be entered into the calculator –
- Loan amount
- The interest rate charged by the lender
- Repayment period
- Prepaid amount
Based on this information, the calculator will display a reduction in tenor and loan EMI. Borrowers should also note that no prepayment fees will be levied as per RBI mandate on home loans at floating interest rates. However, for home loans at a fixed interest rate, lenders may charge a certain amount as a prepayment penalty fee.
3. Opt for a shorter tenor
Borrowers can also consider opting for a shorter repayment period to settle the loan and save on interest repayment faster. In this case, one should keep in mind that reducing the repayment period will increase the EMI amount.
In that case, they can use an online home loan EMI calculator to determine a suitable tenor that will enable them to pay their monthly installments without straining their finances.
To use a home loan EMI calculator, one should enter the following information –
- Required loan amount
- Repayment period of choice
- Bajaj Housing interest rate
Based on the above details, the calculator will compute the monthly EMI amount, total interest payable, and amount owed to the lending institution.
Individuals with a positive repayment track record can use it as leverage to negotiate with their lender regarding a shorter repayment period. If the current lending institution refuses to negotiate, borrowers can transfer their outstanding home loan to another financial institution or HFC offering better service terms.
Apart from that, look for an HFC that extends pre-approved offers to borrowers to facilitate a hassle-free and quick application process. Such offers can be availed on an array of credit products such as home loans and loans against property. Applicants can easily check their pre-approved offer by providing only their name and contact details.
Besides going through a guide to closing a home loan effectively, borrowers also need to regulate their expenses and other funds and investments to maximize the cash flow. Doing so is essential as any additional amount saved can be used to pay off the housing loan.