Once he had achieved financial stability, Sumit decided to buy his dream home. While he had saved some funds, they weren’t enough for the kind of house he wanted to buy. He decided to avail a home loan. With a high credit score and stable job profile, he was told that he could avail the amount of loan needed to buy the house. However, when he used the home loan EMI calculator, he was overwhelmed with the amount of Equated Monthly Instalments. Being his first-ever debt, he was doubtful if he would be able to pay them on time.
A housing loan is a huge financial commitment that can be unnerving at first. However, with effective financial planning, you can pay your loan comfortably. Here are a few tips to help you pay your home loan EMIs.
- Choose the lender carefully
You must take the home loan with a lender that offers you the cheapest deal. Therefore, you must choose the lender carefully. Compare different lenders to find the one that has the lowest home loan interest rates. You must also check their processing fee and other charges, as all these add to your EMI. Moreover, it would be best to consider additional facilities like overdraft facility and balance transfer, while choosing a lender.
- Opt for a comfortable tenure
To be able to pay your EMI comfortably, you must choose a comfortable tenure for yourself. A long tenure would mean small EMIs. However, it would increase your interest outgo and thus your total cost of borrowing. Similarly, with short tenure, you can repay the loan faster, but your EMIs will increase. It can put pressure on your daily budget and can lead to defaults too. Therefore, you must determine your financial viability before choosing the tenure for you.
- Pay a larger down payment
The best way to manage your EMI well is to take a lesser home loan amount through a larger down payment. Ideally, lenders require you to pay 20% of the property value as a down payment. However, if you can afford it, you must pay a higher down payment. Paying a higher down payment would reduce your loan amount and help you pay the EMIs comfortably.
- Increase your EMIs
Many lenders let you restructure the loan. After a couple of years, when you get a hike or promotion, you can restructure your loan and increase EMI. Paying higher EMIs would help you pay off the loan faster. You can gradually increase your EMI whenever you can afford to pay a higher amount towards the loan. You can also use monetary gifts, bonuses or any other additional income to make prepayments towards the home loan EMIs.
Paying your EMIs on time is crucial to managing your loan effectively. Therefore, you must chalk out a plan to pay the EMIs before you avail a loan. Before you decide on the loan amount, you must assess your income and expenses and ensure that the loan is financially comfortable for you. So wait no more. Check your loan eligibility and apply for a home loan today.
