Owning a house is a dream come true. If you have taken a home loan for this, congratulations to you for having done the financially sensible thing. Constructing or purchasing a house of your own is one of the most important decisions in one’s life and banks and financial institutions make our dreams come true – if we handle our finances well enough. With the loan, comes the responsibility to repay it on time. Here are some tips that will help you manage your finances and pay your EMIs efficiently.
Manage your money
Money management is the first and foremost thing one needs to work on. If you know how to manage the money in hand, it is half the battle won in managing your home loan EMI. To start with, make a budget. Write down your fixed, variable, and predictable monthly expenses against your income. Cut down all the luxury expenses and those that you can forego. Spend money only on necessary things. Set aside funds for savings, emergency expenditure, and EMI. Use only the money that remains for expenses.
After budgeting, another important aspect of money management is an investment. The funds that you set aside for savings can be invested where huge dividends or profits are paid off. Check on PPF, ULIPs, and deposits in Post Office. In short, invest where you are not charged huge amounts and where you have an assurance of returns on investment.
Opt for a home loan balance transfer at a lower interest rate
Check out home loan plans offered by other lenders. When you find a home loan scheme that suits you and has a lower interest rate than your existing home loan plan, you can opt for a home loan balance transfer. When you transfer the balance of your home loan, you save up on the overall interest amount payable. However, while you compare home loan offers, make sure you have a look at the other fees the lender levies on the home loan. Processing fee, pre-payment fee, and service fee are some of the fees that you should look into.
Read When should you opt for a home loan balance transfer
Increase your home loan EMI amount or make a prepayment
In case you receive a salary increment at work or gain profits from the sale of an asset, you can use it to repay your home loan faster with a pre-payment. If you received an increment and that is a consistent income increase, you can increase the EMI amount. If you received a profit, you can use it to prepay your home loan. Based on the amount you received and the loan amount yet to be repaid, you can either partially or fully repay your home loan.
In case the profit you enjoyed is higher than the loan amount to be repaid, you can foreclose your home loan by paying the full amount due.
Use home loan calculators
Home loan calculators assist home loan applicants in determining eligibility to avail loan, the loan amount that can be applied for, loan tenure, and EMI that should be opted based on repayment capacity. After you avail of the home loan, you can still use the home loan calculator to check on the EMI to be paid based on tenure and interest rate so you can plan your finances accordingly.
You can access the home loan calculators here:
Home loan eligibility calculator
Home loan EMI calculator
Home loan affordability calculator
Home loan balance transfer calculator
These are easy-to-use calculators where you enter the requested information and you receive a calculated data as output. You can use the resultant information in budgeting.
Do not miss paying your EMI
We cannot stress this enough – Do not miss paying your EMI dues to your lender. This affects a lot of areas. To start with, you will incur late/missed payment penalty charges, and that will be an additional burden. Missing EMI payments is termed as a penalty and reflects in your CIBIL report and CIBIL credit score. This reduces your credit score and is on your credit record for the rest of your life. Any lender that you approach in the future will be able to view this as a negative record. This will affect your future loan plans.
In case there is an emergency such as a death in the family, or job loss, and you are unable to pay your EMI dues, contact your bank branch manager. Visit your manager and talk to him/her about your situation and request a time-off from paying EMI. A maximum of 6 months lee-way is given by the banks in such situations. Please note that this does not mean that the banks will waive off your EMI for 6 months. It only means that for the period that you are coping up with your life situation, you don’t have to pay EMI. But subsequently, you will have to pay for it.
Bank managers decide on such things on a case-to-case basis. Therefore, present all the facts and your concerns with a request for the period you wish to be EMI-free before you can return to repayment again.
If you implement all these tips, you can be sure that EMI repayment for your home loan will be complete without any hassle. If you have any questions, feel free to post them in the comments section below.