Availing of a housing loan has become extremely convenient, considering the availability of online applications. One simply needs to visit the website of his/her preferred lender and fill in the application to begin the process.
However, upon receiving the loan corpus, the next crucial step is to calculate EMI for home loan and the proper management of loan EMIs. Failing to do so can result in loan defaulting, which can negatively impact one’s credit score.
Considering the above points, here are a few ways to efficiently manage home loan EMIs:
- Schedule EMIs
Paying your EMIs on time increases creditworthiness of borrowers. Consider scheduling the EMI close to salary due date to ensure adequate funds in account and reduce the possibility of default due to a lack of funds.
Note that skipping an EMI incurs stiff penalties from the lending institution. In addition, it has a negative impact on your credit score, and a prolonged default may result in the lender acquiring your home.
Thus, home loan borrowers must use a housing loan EMI calculator and compute the monthly instalments beforehand. This will help them make a financial strategy according to their budgetary needs.
- Opt for loan prepayment
Home loan prepayment is another method for the efficient management of EMIs. This facility is extended by various banks and financial institutions, which allows individuals to prepay, either fully or partly, the loan corpus. Some lenders do not charge any fee on prepayments for loans disbursed on floating interest rate.
One can use bonus or maturity proceeds from insurance policies, should be used to prepay a portion of the home loan on a regular basis. By making substantial lump sum payments, a borrower can significantly reduce the loan burden. However, there are a few important factors to keep in mind when prepaying a home loan. For instance, it is preferable to make lump sum payments during the early years of the loan when the principal is low.
In this regard, one can utilise a home loan EMI calculator. This online tool allows individuals to calculate EMI for home loan with respect to the loan amount and rate of interest. One of the benefits of calculating EMIs before taking a home loan is that it allows borrowers decide the right time for loan prepayment through the amortisation schedule.
- Opt for a balance transfer
Home loan balance transfer deals with transferring one’s existing loan account to another lender offering better terms and conditions. If a borrower has to pay substantial interest towards a home loan, he/she can utilise a housing loan calculator to determine the cost of borrowing and shift the loan account to a preferred lender. This will result in lower EMIs and lower the risk of loan defaulting.
There are several reasons for choosing a home loan balance transfer. The most common one is to reduce the interest rate. Apart from that, some lenders also offer top-up loans when one opts for this facility.
Apart from that, leading financial institutions also offer customised pre-approved offers to attract borrowers. These offers are available on various financial products, such as home loans and loans against property. They help significantly in streamlining and simplifying the loan application procedure. Furthermore, individuals can check their pre-approved offers by entering their names and contact details.
However, before opting for home loan balance transfer, it is important to do a cost-benefit analysis. In this regard, one should try to transfer his/her loan during the initial years of borrowing, as this will help them benefit from lower interests for an extended period.
Considering the above-mentioned points before availing a home loan is important for better financial planning. Borrowers must consider to calculate EMI for home loan beforehand and devise a repayment strategy depending on their income and repayment capacity.
In this regard, one can also use an online home loan calculator to increase his/her monthly EMIs. By doing so, individuals will be able to repay their loans quickly and also cut down on interest payments. However, increasing the EMIs is advisable only if a borrower has enough monthly income to substantiate the process.
Furthermore, borrowers should try to pay an extra EMI every year. Though it can be difficult at first, it pays off handsomely in the long run. One can reduce his/her overall outstanding principal amount by paying an extra EMI each year.
Managing EMIs efficiently becomes easier when borrowers calculate EMI for home loan before proceeding with the loan application. This will help them be prepared for the repayments and gather the necessary funds in advance.