Smart Ways to Manage your EMI on Home Loans

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Taking a home loan is a big commitment. It is the right step towards making your dream home a reality with systematic planning and without draining out your savings.

The interest to be paid, however, can be a burden which you can manage with some practices, like the ones stated below.

Schedule your EMI

You can schedule your EMI (Equal Monthly Installment) payment towards the date that you receive your salary. If you have other constant incomes like rental income from another house, you can set the date towards the start of the month when you are likely to receive the payment.

Not planning your payment could lead insufficient funds at when the due date arrives, which could cause a default in payment.

A payment default will bring a negative effect on your credit score, while timely payment can improve your credit worthiness.

 

Pay a higher EMI

If you can, increase the EMI amount you were supposed to pay so that you can reduce your loan tenure by some months or even a year. Make sure you are able to generate the income to pay off the higher EMI, probably by improving your equity or other investments.

You can even opt to part pay your loan as and when you can. For example, if you receive a bonus or a policy matures, you can use it for your prepayment. This too will help you reduce your loan repayment tenure.

 

Manage your investments

In order to repay your loan, you will need a regular inflow of cash.

While salary is a constant income, having other sources of income will help you increase your cash inflows and not be solely depended on the salary for the repayment of your home loan or interest payment.

An extra source of income will not only help you with the payment of your EMI but you can also be able to prepay your loan partially and reduced your loan burden.

 

Switch the Bank

Lending banks often lower their interest rates at different time intervals inorder to diversify their interest rate reset periods. You can switch to a different bank, if you feel you will benefit from the lower rates. The "Balance Transfer Schemes" allows customers to switch to another bank of their choice with the entire or major unpaid principal amount of your home loan.

However, do not make this switch very often or for minor difference in interest rates. This is because the switch will require you to undergo a loan appraisal and underwriting process along with paperwork. You will also be charged a nominal fee for this facility.

Keep checking the bank rates of various banks for newer schemes.

 

Read more about: emi, home loan
Story first published: Tuesday, April 10, 2018, 15:23 [IST]
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