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How to Preclose your Home Loan in Five Smart Ways

Home loan prepayment needs a lot of planning and saving. Here are five things you need to do if you want to save money and prepay your home loan.

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How to Preclose your Home Loan in Five Smart Ways

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  1. How to Preclose your Home Loan in Five Smart Ways

  2. Taking a home loan helps you fulfil your dream of owning your own property. • The time is right and the market condition is favourable for people to avail of a home loan. • But a loan always has to be repaid. • If you add the interest incurred on your home loan to the principal amount, you will realise that you pay more than double the amount of your sanctioned loaned over the tenure of your loan.

  3. For example, you get a loan for 30 lakhs for an interest rate of 9 per cent per annum for tenure of 30 years. • If you set the principal aside, net payable interest sums up to more than Rs. 56 lakh, taking the total amount payable to the lender to more than Rs. 86 lakh.  • If you reduce the tenure of the loan by 20 year and opt for pre-closure of home loan you can save up to 41 lakhs in interest.

  4. Home loan prepayment needs a lot of planning and saving. Here are five things you need to do if you want to save money and prepay your home loan.

  5. Pre- EMI plans are a trap

  6. Banks and builders offer pre- EMI plans on Home Loans for under construction property. • In this scheme you only pay the interest while the property is under construction and then pay the actual EMI once you move in to the property. • This scheme does not reduce your principal amount until you move in to your flat and start paying the real EMI.

  7. Maintain your income to debt ratio

  8. Maintaining your income debt ratio means, increasing your EMI payments when your disposable increases. • This will help you in the prepayment of your Home Loan.

  9. Use your windfall gains

  10. Windfall gains are incomes like lottery wins, bonuses and gifts. • You can use this money for the pre-closure of your home loan. • These funds help you make partial bulk payment thus significantly reducing the debt.

  11. Savings are the key

  12. Save more for the prepayment of your home loan.   • For example, if you plan to prepay Rs. 60,000 next year, start saving Rs. 5,000 every month. • Recurring deposit is a great option for such savings. • Putting your money in a strategic savings plan will ensure that your money is safe and you can use it for the prepayment of your home loan.

  13. Use financial services

  14. There a number of financial services that are offered by banks and NBFCs that can help you in the prepayment of your Home Loan. • Explore them and use them to your advantage.

  15. Thank You

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