Home Loan

14 Ways How to Repay Home Loan Faster to Shorten Loan Tenure

Purchasing a home is a significant milestone in one’s life, but it often comes with the long-term commitment of repaying a home loan. The idea of being mortgage-free sooner is appealing to many homeowners, as it provides financial security and peace of mind. Fortunately, there are several strategies to help you repay home loan faster.

In this article, we’ll explore some effective methods to accelerate your journey towards debt-free homeownership and shorten your home loan tenure.

1. Make Extra Payments Whenever Possible:

One of the most straightforward ways to repay home loan faster is by making extra payments. This can be done in several ways:

Lump Sum Payments: Whenever you receive a windfall, such as a bonus at work, tax refunds, or an inheritance, consider making a lump sum payment towards your home loan. This reduces the principal amount and, in turn, the interest you’ll pay over the life of the loan.

Bi-Weekly Payments: Instead of making monthly payments, switch to bi-weekly payments. Over a year, this adds up to one extra monthly payment, which goes directly towards reducing the principal.

Round Up Your Payments: Rounding up your monthly payments to the nearest hundred or even the nearest thousand can significantly accelerate the repayment process.

2. Increase Your EMI (Equated Monthly Installment):

If your financial situation allows, consider increasing your EMI. A higher EMI payment means that you’re paying more towards the principal each month, therefore reducing the loan tenure. Before doing this, ensure you’re not incurring any prepayment penalties or additional fees for changing your EMI amount.

Also Read: How to get a car financed without a job? (No Job, No Problem)

3. Allocate Windfalls Wisely:

Instead of splurging your windfalls, use them to make strategic home loan repayments. This can include not just annual bonuses or tax refunds, but also any unexpected cash influx, such as a gift or an unexpected windfall. The discipline to prioritize loan repayment over immediate gratification can yield long-term financial benefits.

4. Use Any Additional Income Streams:

If you have any passive sources of income, such as rental income from a property, freelance work, or a side business, consider dedicating a portion or the entirety of these earnings towards your home loan. These extra funds can make a significant dent in your outstanding loan amount and will help you repay home loan faster.

5. Refinance to a Lower Interest Rate:

Keep an eye on prevailing interest rates and consider refinancing your home loan if you find a better deal. Lower interest rates mean lower monthly payments, which can help you repay your loan faster or at least save you money in the long run.

6. Choose Shorter Loan Tenure:

Opting for a shorter loan tenure when you initially take out the loan can significantly reduce the total interest you pay. While this might mean higher EMIs, it also means that you’ll repay the loan faster. However, ensure that you can comfortably manage the increased monthly payments before choosing this option.

7. Make Use of Home Loan Prepayment Facilities:

Most lenders allow borrowers to make partial or full prepayments without incurring penalties. Utilize this facility whenever possible. Every extra rupee you pay directly reduces the principal amount, leading to interest savings in the long term.

8. Consider Making One Extra Payment Annually:

In addition to your regular EMIs, make one extra payment each year. This can be in the form of an additional monthly payment or a lump sum payment. Over time, this extra payment can considerably reduce your loan tenure.

9. Keep a Close Eye on the Loan Statement:

Regularly review your loan statement to track your progress. Ensure that the extra payments you make are correctly applied to the principal, and that there are no discrepancies in the calculations. This vigilance can help you stay on top of your loan and make any necessary adjustments.

10. Create a Budget and Stick to It:

Developing a budget can help you manage your finances more efficiently, enabling you to allocate more money toward your home loan. Identify areas where you can cut costs and redirect those savings towards your loan. Being disciplined with your finances is a crucial step in repaying your home loan faster.

11. Invest Wisely:

Consider investing any surplus funds in investment options that offer higher returns than your home loan interest rate. This allows your money to grow while you continue repaying your loan. However, be cautious and seek financial advice to ensure your investments align with your risk tolerance and financial goals.

12. Monitor Your Credit Score:

Maintaining a healthy credit score can potentially help you negotiate better terms with your lender. A good credit score can lead to lower interest rates, which, in turn, can help you save on interest payments.

13. Avoid Taking on More Debt:

While it’s tempting to take on more debt, such as additional personal loans or credit card debt, it’s essential to resist this temptation when you’re focused on repaying your home loan faster. New debt can make it more challenging to allocate extra funds to your home loan.

14. Consult a Financial Advisor:

If you’re unsure about the best strategies to repay home loan faster, consider seeking advice from a financial advisor. They can assess your financial situation and goals and provide tailored recommendations.

Repaying your home loan faster requires discipline, planning, and financial management. It’s a journey that involves making small, consistent efforts over time. By implementing these strategies, you can significantly reduce the burden of your home loan and achieve the financial freedom that comes with being mortgage-free. Remember, the journey may not always be easy, but the end result is well worth the effort and sacrifice.

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