Home Loan Rates 2018 309 views
After all celebrations, house warming party, sweets and gifts, the time has come to pull up your socks and get ready to pay your home loan. If you have taken a home loan to buy a residential property, it is really important that you have enough funds to repay the EMIs of your home loan on time. It is not just important in the context of your loan, but delayed and default payments will increase your financial burden. It is a great feeling to live in your home, but it is really difficult to maintain the same esteem and money follow to repay home loan for a longer period. You must have taken the loan for at least 10-15 years of time and for that period you have blocked a specific amount to repay your loan. Besides, the principal amount, in long run you end up paying a higher amount in the form of interest. At times, if the loan is borrowed for more than 20 years you end up paying almost the same amount or even more as interest, which you have borrowed. For instance Pankaj Shirish is working with an IT firm has borrowed a loan of Rs. 30 lakhs @ 9.9% from a reputed bank for 20 years. His monthly EMIs is 28,752. But when he calculated this total outgo as interest on the loan amount, he was shocked to know that he will be paying Rs. 39,00,519 as total interest. It clearly indicates that if you are borrowing a loan for 20 years or above, you will pay more amount as interest against your loan. That’s why most of the banks encourage you to opt for a loan for longer period. They show you the lowest EMI, but will not tell you upfront the total increased interest outgo on your principal amount.
Although most of the leading banks are offering competitive interest rates and flexible payment options to lure more customers. But even the minute difference in the interest rate can impact your total outgo in long-run. If you have taken a loan for a longer period, just calculate your total outgo as interest, not only your monthly EMIs amount. Try to repay your loan and close it as faster as you can. Here are some unconventional methods to repay your loan early.
Postpone your travel plans: Going for long vacation or plans for any trip with friends and family can be avoided for some time. It will help you to save some money. If you are travelling within the country you might buy a train ticket, air tickets, but if you are going for some international destination you will surely buy air tickets either with your credit card or debit card. Most of the people prefer buying their travel tickets with credit card. Though, it must be cheaper, but still you should use that money to repay your home loan faster. Usage of credit card will increase more burden in the form of interest or in the form of credit card EMIs. At the end, it will affect your budget. Therefore, it is advisable if you can avoid travelling for some time, just do it.
Skip your honeymoon: You got married recently and planning to visit an international destination for your honeymoon, just skip that idea. Visiting any international destination will require at least Rs. 80,000 to Rs. 1 lakh. Therefore, it is not really a wise idea at this time, when you have more important financial liability on you.
Make small or big partial pre-payments: This is one of the most simple and easy way to reduce your loan amount and EMIs. Split your monthly income into three sections, one is for EMI amount, second is your monthly expenditure and third is saving some amount for making partial pre-payment. This is really a simple trick, but it will help you a lot. You can make small savings of Rs. 2000 to Rs. 10,000 per month to save some extra money. Once you have enough fund just divert your savings to your loan amount. You can make partial payment at any point in time. The minimum amount accepted by the bank in the form of partial pre-payment is Rs. 10,000. Whenever, you feel you have saved more than Rs. 10,000, transfer your money in your loan.
Reach the principal amount early: For the initial few years of loan, you are just paying the interest amount and the principal amount stands the same. So for the initial few years, make the partial pre-payments as much as you can to reduce the interest amount faster. Once your reach your principal amount you will see the difference in the interest rate and even the remaining amount. Extra amount diverted towards repayment of your interest will help in saving your money and reduce your interest amount and most importantly help you to close your loan early.
Don’t take any personal or unsecured loan: Try to avoid the temptation to get an unsecured or personal loan in-between of your existing home loan. The rate of interest of home loan is lower as compared to unsecure loans. If you are in urgent need of money, first ask your family and friends to borrow the amount, rather than applying for an unsecured loan. The average rate of interest of personal loan of different banks range between 12% to 18%. Some banks even charge more than this rate from their customers. So it is advisable to avoid taking any personal/unsecured loan at this point.
Involve your family members: If your spouse or some other members in your family are working, involve their earning to repay the loan earlier. You can use some portion of their salary to repay some extra amount against your loan. It will help in reducing the loan amount.
Don’t apply for higher amount: You think you are eligible for getting a higher amount from the bank as per your salary and annual income. Don’t get tempted with applying for a higher loan. Apply for an amount, which you feel you can repay easily within shorter period of time. A higher amount ensure a longer repayment cycle and require more money in long-run. Hence, apply for a loan amount, which is within your reach of repayment.
Lease your other property: If you have another property, which is not in use. You should lease that property to increase your income. You can use that rent amount against your loan, be it a small portion, but it will help in earning some more money. Don’t use your rent amount for your personal needs unless you are badly trapped in financial crunch.
Minimise your credit card usage: You are a frequent shopper and use your credit card to shop around. Change this habit of swiping your credit card for making any kinds of payments. Use your debit card or cash instead of credit card. It will help you to reduce your expenses and keep a check on your total spending. This way you will not end up making payments for unnecessary things. Even the big buys with credit cards should be avoided, unless you are not getting more rebate or befits with card payment.
Take some part-time jobs: To reduce your interest outgo soon you can take some part-time job on weekends or work from home if your daily time-table allows. If you reach your principal amount soon, it will help in reducing your total loan amount and even closing it faster. Use this money to make partial pre-payment against your home loan.
Save some money before applying for loan: This is one of the simple and the best formula to reduce your loan amount. The more you take, the higher you pay. So to make it simple and accessible, just save some money in advance almost 30% to 40% of actual amount of the property. This way you need to apply for a lower amount.
Always keep 3 months EMI amount in your account: This is really important for paying your EMIs. This will help you in case of any financial emergency or if you will switch your job. This way you will not default your payments. Ensuring the amount of three EMIs in your bank account always gives you a breathing space. In case, at any point in time you don’t have enough funds to pay the EMIs you can use that amount.
Reduce your phone bills: Most of us spend a good amount paying our mobile bills and recharging our mobine data. Search for a more competitive rental plan or lower bill plans to reduce your bill. If you think that your service provider is charging you more on rental and calls, ask your service provider to change the plan. In case, you don’t find any rental plan to suit your requirement, change your service provider. Small saving can fetch you good amount over the period in time.
Fixed deposits: If you have fixed deposits of six times higher than your salary, use that amount to make pre-payment of your loan. A fixed amount is fetching you annual interest of maximum 8% per annum, whereas you must be paying minimum 9.65% of interest against your home loan. So there is no point of blocking the money for lower earning interest rates. Use that amount to reduce your financial burden.