Paying the installments of home loans early can benefit an individual in many ways. The loans paid early can help an individual become early debt-free, save money on interest repayments & also help an individual improve the CIBIL score. The loans can opt for a maximum duration of 30 years however the actual approval of loans depends upon the age of the borrower. The borrower by repaying the loans early can become early debt-free and free from liability. It is better to repay the loans early as the borrower can save money on the interest repayment. Very few lenders charge a penalty to the borrowers on early repayment to keep the business of home loans running. The borrowers are free to borrow home loans from any of the lenders who charges the lowest interest rates. These most of the banks encourage the borrowers to repay the loans early as the bad debt of the banks is rising continuously. The loans are available to the borrower at attractive interest rates. As the repo rate of RBI is continuously being declining the interest rates are falling drastically. Thus due to falling interest rates, the burden on the borrower is drastically been reducing.
There are multiple strategies in which the borrower can repay the installments at a faster rate than the actual term thus shortening the tenure of loans. The borrower can repay the loans by reducing the miscellaneous expenses and utilize them for the repayment of home loans. The shorter the tenure opted for the home loan higher are the monthly installments being applicable while as lower is the repayment value for the loans. While the higher the tenure of the loan lower is the monthly installment but the higher is the repayment value for the loans. In case of better salary and affordability, it is always recommended to keep the tenure of the loans lower as it helps in reducing the repayment value for the loans. There are also various government schemes for home loans under which the repayment value of the home loans can be reduced. The borrower out of the multiple schemes being available for the home loans can avail only one scheme for one benefit at a time. Investment in financial instruments like stocks & mutual fund is also beneficial to grow the amount of money that the borrower has to repay home loans.
Strategies to repay home loans quickly:
Increase the monthly savings for repayment:
The borrower can increase the monthly savings by reducing the miscellaneous expenses and thus utilize the funds to repay the loans faster than the actual tenure. The borrower can obtain a rebate on the home loans by repaying the home loans faster.
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Utilize the excess amount to repay the loans:
The borrower can spend the excess amount gained like the bonus, incentives, and variable pay for the payment of the home loans. This can help an individual shorten the tenure of loans by repaying the loans faster.
Avail the subsidy on the home loans:
The borrower if suppose the first-time buyer can avail subsidy from the government on home loans. Under the Pradhan Mantri Awas Yojana, home loan borrowers can avail of loans at a subsidized rate by availing subsidy of Rs.2.67 lakh on the interest repayment. Thus by reducing the repayment amount the borrower can become early debt-free.
Invest in financial instruments to increase the value of money:
The savings in the bank account can be invested in stocks, mutual funds, or SIP. This can help in the rapid growth of money on the existing savings and thus the returns gained on investments can be utilized for the repayment of home loans. Approximately for a loan of 10 years or more a borrower can expect the wealth to grow in 5 years in which an investor can expect good returns on investment.
Transfer funds to another lender in case of higher interest rates:
The borrower if finds that the interest rate in the existing home loans is high then the borrower can switch the account to another lender thus by reducing the interest rates the borrower can reduce the repayment value and also reduce the tenure of the loans.
Thus there are various ways in which the borrower can repay the loans in a faster way. Faster repayment can help an individual reduce the repayment value on loans and also help in increasing the CIBIL score of an individual. Debt reduction can thus help an individual lead a tension-free life.