Repaid Your Home Loan in Full? Here’s What to Do Next
So it has been more than a decade that you took a Home Loan? It might be a huge amount back then and there are high chances its repayment was eating a major chunk of your monthly income. But with a change in interest rate regime and your increased income, you might have thought to repay your loan amount in full.
If you have closed you Home Loan recently with your savings, you might have a higher monthly disposable income going forward. If yes, what would you do with that money?
Spend extravagantly and indulge yourself? No! This is not a smart thing to do.
After finishing off your biggest debt (i.e. Home Loan), you must consider analyzing your finances and revisiting your financial plan. Here are some important things you should do after repaying your Home Loan in full:
1. Check Total Surplus
You might be spending about half of your salary in Home Loan EMIs earlier. Now that 50% of your salary will remain with you, it’s obvious to have a surplus in your account. Post your expenses, analyze and be clear about exact amount of available surplus.
2. Prioritise Your Goals
It’s really important to prioritize your goals when you have money in your hand and then allocate your surplus prudently. Prioritize your life goals and allocate funds accordingly. Consider fulfilling your long-term goals together with the short-term ones and allocate funds accordingly. Give utmost importance to your child’s education, retirement planning, Life Insurance and Health Insurance. Use the remaining amount for short-term goals like a car, vacation, etc.
3. Prepare a Reasonable Budget
If you have a list of some indulgences for which you want to use that surplus, prepare a reasonable budget and make purchases according to your priority. For example, if you are planning to purchase a new car for daily commute, now is the good time. After making necessary expenses, you will have a clarity of how much money you can save each month and what to do with that amount.
4. Repay Other High Cost Debts
Do you have other short-term loans of a small amount to repay such as a Personal Loan, Education Loan, etc.? You can consider paying them off with new surplus available. Start paying off the most expensive loan first. Doing this will provide you with even more surplus to spend and save.
5. Revise Your Financial Plan
Will paying off your loans change your spending or saving goals? Will it help you reach some of your goals earlier than you would have thought because you have more money available now? After you have repaid your entire Home Loan amount, it’s time to revise your investment plan according to the current financial position. You can add new saving or investment goals to your list.
We hope that taking the points mentioned above into consideration, you will use your surplus money wisely.
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