As the name suggests, you take a Home Loan when you are buying a house, a plot or renovating your home and expanding it into a newer version. In today’s world where real estate is booming at a tremendous rate, having the liquid cash or funds to purchase a home is a tad bit difficult. This is where you need to take a Home Loan. A Home Loan EMI (equated monthly instalment) gives you the capacity to buy your dream home, and you return the loaned amount in a particular period.
Each one of us has different ideas of a dream home, and since each house is different, you will have to loan a fixed amount of money. However, before that, you should be aware of the amount for which you are eligible. In simple terms, your loan amount is dependent on your repaying capacity, which in turn is dependent on your income/salary. Hence, the higher is your salary, the higher is the amount you will get in a loan. In most common scenarios, the bank assumes that you can repay 50% of your income as an EMI. The period and the rate of interest is thus dependent on the amount you choose to repay.
In most situations, the bank will require you to pay 10-20% of the home’s price as down payment and the lender provides the rest of it. The most important point to keep in mind here is to ensure that you pay the maximum amount of down payment. This will not only decrease your EMI, but your interest rate over a shorter period is also lesser. Most Home Loans last for at least 15-30 years, and the interest rate over time shoots up.
Now that you know the basics of a Home Loan, here are ten smart ways of managing Home Loan EMIs:
With a large number of credits available in the market, the process of choosing the right alternative is bound to get confusing for you. Each seems better than the other does, and you are just stuck in a rut, scratching your head about the best Home Loan. An attractive interest rate and quick processing are things you should look out for, and RBL Bank Home Loan is one such loan. If you have an account in the bank, you can also seek a Home Loan from them because of your relationship with the bank matters in your ability to get a good interest rate.
Taking a Home Loan is a burden, especially for families and couples that have just started out. It is essential to make a smart decision about your finances when it comes to taking a Home Loan. You have to calculate and analyse whether taking the credit would be okay for the family’s sustenance. Keep track of all your investments, and if there are investments that you feel are unnecessary, you should simply close them and focus instead on your Home Loan.
Always keep an eye out for the critical financial documents and keep them updated. This makes it easier to manage your various loans.
We mentioned it a little earlier, but to ensure that you are able to pay your Home Loan with ease and not burdening yourself or your family much, you should always stick to a Home Loan EMI amounting to just 40-50% of your income, and nothing beyond that. This will help you comfortably manage your day-to-day expenses.
You may be wondering why we are advising you to go for a high EMI. Well, the secret is – if your EMI is high, you have the loan for a shorter tenure, and hence, your interest rate is not as high, and you can quickly pay it back without spending all the money on interest. Over a period, your loan burden and financial strain are much lower.
EMI Calculators are easy to use tools (most are now available online), and these can help you find the best possible instalment amount you should pay towards the Home Loan.
Home Loans are big business, and you may forget to pay it someday or your cheque bounces, and this will cause a default. Not only will it affect your credit score, but also you will have to pay a late payment. The best solution is to opt for auto debit and be tension-free about your monthly EMI.
A smarter option is partial payment, and not many people have heard of it. Therefore, in a partial payment, instead of the EMI, you pay fixed amounts to your loan every month. This reduces the loan amount and tenure as well as the financial burden.
Your credit score important factor that will help you in your loan management. It will ensure that you get future loans at a much lower interest rate.
If one day one of your fixed deposits mature and you are able to get the amount to repay your Home Loan, please pre-close the loan ahead of the tenure. If you had opted for a floating interest rate, no charges are applicable, and you can pay off your Home Loan in a moment.
We hope all these ten tips will help you manage your Home Loan EMIs well and help you make an informed decision.
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