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In this blog, we will show you some easy but intelligent and informed ways to cut down the time of your home loan and save some cash while you’re at it. Many people strongly want to remove their home loan early. This saves you a substantial amount of money in interest and gets you out of debt quicker-but the real question is, how can you make your home loan term shorter?
1. Make Extra Payments Whenever Possible
To cut short the time you’re paying off your house loan, one simple method is to include a little extra money whenever you can. You don’t need a strikingly large cash boost or a major bonus to get started. Little by little, these small additional payments really mount over the years.
So think about borrowing ₹30 lakhs and it’s supposed to be paid back over 20 years with an 8% interest rate. Now, if every month you decide to pay an extra ₹5,000 than what you’re supposed to, you could end up making the time shorter that you need to pay back the loan by approximately 5 years; this move could help you keep a lot of money, specifically: lakhs, just on the interest you would have paid otherwise.
2. Switch to a Biweekly Payment Plan
Consider paying every two weeks instead of once a month. You’ll spend half your monthly bill but do it bi-weekly. With 52 weeks in the year, you’re hitting 26 half-payments which equals 13 complete payments annually, instead of just 12. This bonus payment each year might help you pay off your loan significantly faster.
For instance, on a ₹20 lakh loan with a 10-year term at 8% interest, switching to biweekly payments can help you pay off the loan 3-4 years earlier. Over time, this small change leads to big savings.
3. Refinance Your Home Loan
Refinancing a home loan means taking out a new loan to pay off an existing loan. Is it worth it? You can get a lower interest rate or change the loan term to shorten the repayment period.
Think about this scenario: you’re trying to clear off a 25 lakh loan that has a 9% interest rate–but then you find a deal that offers just 7% interest. This means your monthly payments will increase. If you keep paying the same amount as you were originally, the surplus money will start cutting down the principal part of the loan pretty fast. You will find yourself paying off what you owe faster.
However, refinancing has its own costs, including fees and possible penalties. Before making a decision, check whether the interest rate is higher than the original payment.
4. Round Up Your Payments
By just increasing your loan payments from ₹19,250 to ₹20,000 every month, you can save money on what you pay in interest through the months and years, and pay off your loan faster. This might seem minor–but making your payments slightly more can really change the length of your loan repayment. It’s a small step–but it can really reduce the total interest you owe and remove your loan sooner.
By adding an extra ₹500 to what you usually pay every month for a ₹15 lakh home loan, and if you’re paying it back over 15 years, you could remove 2 to 3 years from the time you need to pay it all back. This sentence is already effectively punctuated; this is because all those extra ₹500 payments really materialize, making you finish paying the entire loan significantly faster.
5. Make Lump-Sum Payments
IIf you have extra money, maybe from a job bonus or getting money returned from taxes, it’s intelligent and informed to consider paying off your house loan faster. Offering a large amount of cash at once on it is a smart idea because it means you won’t be in debt for as long.
If you get an extra ₹1 lakh, put a portion of it towards your loan; this might help you finish paying your home loan sooner by reducing how much you owe. Putting money towards your principal balance means you’ll give less money to the bank in total.
6. Increase Your EMI Gradually
If you start making more money, the bank is encouraged to contemplate making your monthly loan payments larger. Increasing slightly your EMI when you earn more is intelligent and informed; this can cut down the time it takes to pay off your loan by several years, even if the raise in your EMI is very small.
For example, if your monthly EMI is ₹15,000, and you increase it by ₹2,000, you will pay off the loan faster. For 5 or 10 years, this increase can add up, reducing the loan tenure by several years.
7. Check for Prepayment Penalties
Before you start including extra cash to pay off your loan, it’s a good idea to see if your bank’s going to charge you extra money for paying early or making large payments. A large amount of banks let you pay off your home loan without any extra charges, though. Just make sure to read all the details extremely carefully before you decide to pay more. Some banks have a prepayment penalty, so check that first.
Conclusion
Start applying these strategies, and you’ll see you can pay off your home loan significantly sooner than you expect. You can save a substantial amount of money and get rid of your debt faster by cutting down the time of your home loan. By including extra payments, switching to paying every two weeks, or offering large payments when you can, or even refinancing, you can really reduce the time you owe. Just remember, even little actions can mount to make a major difference through the months and years.
Remember, the key is consistency. Even if you can’t make large payments, every little bit helps. Take control of your loan, and in a few years, you could be celebrating a home free of debt!
