When To Prepay Home Loan

There are several questions that rise when a person think about getting a Home Loan

. One of the very important questions or worries relate to payment of the loan. In this article, youll get to know in deep about the payment policies, specially the Pre-payments. Pre-payment of the loan is basically when an addition amount of EMI is paid or early payment of the loan is done by the borrower. Doing Pre-payment of the loan lessens the tenure of the loan payment as well as remaining EMIs.

During the tenure, the person might have stable financial position & enough money to repay the loan amount. There is no loss in doing that, but, before paying the Loan, earlier than its tenure, there are certain factors that should be taken into consideration. Some of the factors are discussed in brief that might help in taking the decision with ease.

Income Stability

Considering the income stability of the loan taker is very essential. Analyze whether the prepayment of the loan would make the future smoother or burdened. The self-employed or those having their own business very well-understand the instability of money. So, it is advisable to analyze & then take wiser decision accordingly.

Rate Of Interest

A year before, some interest has to be paid on prepayment of loans. But now, it isnt so. As per the direction by National Housing Board, housing finance companies had to put halt on the prepayment penalties for loans with floating rates. However, some of the charges for electronic clearing service or standard instructions charges are charged by few home loan banks. To know exactly about it, its advisable to consult the housing unit with which the person is engaged with.

Know The Right Time

The time should be selected carefully as when to do the prepayment of the loan as there are lots of rules & regulations behind it. The best time to pre-pay the Home Loan is in the first five years as in the starting years, EMIs are much higher. Therefore, it is advisable to either completely pay the loan amount or the amount higher than the EMI in the initial five years.

Payment Structure

Different Finance Houses have different payment schedule. With some, twice a quarter payment can be done and with some once in half a year. This part payment lessens the burden and even helps in reducing the loan tenure & EMI rate.

Prepayment of loan gives a sigh of relief that no debt is there. Along with this, one also invests the extra money (that goes in interest payment) in much better manner. Pre-payment of the loan in a gist is much beneficial in saving the extra amount to be paid in form of interest, but the essential thing is to do it at the right time & right manner.

by: Ashlesh Sharma

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