Are you looking for a home loan to purchase your dream house? Thankfully, banks provide affordable home loans quickly once you meet their necessary criteria and arrange enough amount as a down payment. But securing a home loan is far from a happy ending. Managing its EMIs (Equated Monthly Instalments) efficiently is also a task in itself.
Experts advise not to rush into a home loan without planning its repayment. This blog is here to help you do that.
5 Pro Tips to Manage Your Home Loan EMIs
Follow these 5 top pro tips to sail through your home loan term swiftly and avoid the debt trap.
1. Keep Your Eyes and Ears Open to Spot Lower Interest Rates
You must be thinking that I already did a lot of research to finalise this one. But if you want to manage your EMIs and save some money simultaneously, you must keep an eye on the interest rates of various banks. Banks provide the facility to transfer the outstanding balance of your home loan to another bank.
You can leverage this facility if you get a better deal from another bank. However, consider relevant fees and charges and only change your bank when there is a significant difference in the interest rate.
2. Reconsider Your Terms With the Bank
Yes! You can do it. The terms and conditions you agreed upon with your bank are not set in stone. You can renegotiate them and generate a new deal if you and your bank agree. Every lender provides an EMI calculator. If you find your EMIs to be not affordable or your interest rate unreasonable, you can use that calculator to reach a new arrangement.
Propose your new offer to the bank. For instance, changed repayment tenure. If it doesn’t work out, you can consider a loan balance transfer or taking another top-up loan with a low-interest rate to fill the gap.
3. Get Your Finances Together
Managing instalments efficiently is basically about managing your money smartly. You must do the exercises to sharpen your overall money management skills. For starters, list all your savings, investments, assets, and liabilities. Now figure out any other smart investment that can earn you more interest.
The same goes for savings as well. Instead of saving through a regular savings account, you can keep your money in a digital savings account. Many digital savings accounts give better interest rates than a conventional bank’s savings account. They are the perfect example of smart investment.
4. Keep Your EMIs Higher if You Can
It is simple math. The higher your EMI, the quicker your loan gets over. And the faster your loan gets over, the lesser interest you pay. Therefore keeping your EMIs higher ensures that you spend less on your interest. Also, higher EMIs keep you in alert mode, and you don’t take your monthly payment for granted.
A higher EMI may ask for some sacrifices. For instance, you may need to temporarily part ways with some of your entertainment or luxury expenses. But it’s worth it as you ultimately improve your overall financial position with this move.
5. Use Windfall Gains for Foreclosure or Partial Prepayment
One of your smart investments yielded great returns! You got a salary hike or a huge incentive! Won a lottery – Such occasions call for a celebration. But before you plan to invest this money elsewhere or travel to your dream destination, consider making a prepayment against your home loan.
Enough is said about saving interest in this article. A foreclosure also takes the liability off your shoulder. You can divert the money to another smart investment if you no longer need to pay the EMI. So take advantage of every opportunity to make a part or full prepayment of a home loan.
You may not realise it while taking the loan, but EMIs can sometimes be challenging to manage. Missing a single EMI reflects poorly on your credit score. Missing multiple EMIs is worse as it poses a threat to the bank seizing your home.
But you don’t need to worry. All these 5 financial tips coming from experts make your life super easy. Utilise them to avoid difficult circumstances.
Naina Rajgopalan has a thing for numbers and a deep fascination to learn about all things finance. She’s been money-wise from a young age and has always shared her knowledge and tips with those around her. Being a part of the content team at Freo Save, a digital savings account that offers up to 7% interest rate on savings along with benefits such as insurance on balance, safe & secure banking, and so on, Naina stays updated with the latest of what happens in the banking and fintech industries. She has taken upon herself to share her knowledge with readers across all walks of life to help them manage their finances and budgets better, so they can make better decisions while spending, borrowing, investing and saving.