In recent times, owing to reduced home loan interest rates, alongside favourable market conditions, more individuals are inclined towards borrowing these credits. However, borrowing an advance also brings along the responsibility to repay the same within the designated period.
Paying your EMIs timely helps you to eliminate the possibility of penalties, maintain a high credit score, and impacts your credit history positively. Nonetheless, a significant number of individuals default on payment each year.
To avoid such a situation, make regular home loan EMI payment by following these tips below.
1. Tips to pay off your home loan EMIs faster
Here are the top six tips to follow to manage your home loan EMI in a smarter way.
2. Avail a loan amount that you can afford
Before you apply for a home loan, assess its affordability. To gauge a loan’s affordability, you will need to take your FOIR into account. This denotes your fixed obligations to income ratio. You will need to ascertain that your FOIR remains between 40% and 50% to ensure that you can manage your home loan EMI payments with ease.
3. Make pre-payments
You can choose to pre-pay the loan amount borrowed and save substantially on the interest pay-out. Nonetheless, you will need to ensure that your financial institution does not levy any charges or penalties on pre-payment. These charges can often increase your total cost of borrowing.
4. Look for lower interest rate offers
Always keep checking the interest rates offered by different financial institutions. Many times, lenders offer lower rates on home loans. Opt for a balance transfer facility and shift your outstanding home loan amount to the lender offering lower rates. This can effectively help in reducing your EMIs.
5. Use the home EMI calculator
Home loans come with substantial interest and EMI payment. This is why when you apply for a loan, calculating monthly instalments and interests is essential. Here, a home EMI calculator helps you plan the overall finance in a better and smarter way. Now calculate your monthly instalment amount to perfectly manage your debt.
Leading financial lenders also bring pre-approved offers that can makes availing credits like home loans and loans against property faster. Check your pre-approved offer by providing your name and contact number.
6. Choose a longer tenor
Choosing a longer tenor means that your repayment liability will be spread out over an extended period. This can effectively help you to lower your EMIs. Nonetheless, opting for a longer tenor also means that your total interest outgo will be higher, and the financial institution might levy higher home loan interest rates.
Follow these tips to ensure that you eliminate the risks of legal consequences of defaulting home loan payments.
The legal consequences of a home loan default
In case you fail to make regular EMI payments, you have to deal with the negative consequences. These are as follows-
- The bank or lender might charge you an additional fee.
- There could be a negative impact on your credit score.
- The lender might take legal actions against you or even seize your property.
Interest rates on home loans may go up and down from time to time. That is why borrowers must be diligent with their EMI payments and ensure that they settle their loans on time to avoid increasing their liabilities.
The repayment of a home loan stretches up to 18 to 30 years, making for a long-drawn process. Without proper planning and preparation, it can be difficult to facilitate efficient financial management and pay the home loan EMIs on time. Taking note of the above tips can be extremely useful to pay off the EMIs without undertaking financial risk.