Home loan is cheaper, on the other hand, make a four by making a prepayment, if you cannot make a lump sum payment then reduce the burden of the loan in these ways.

The results of RBI monetary policy have come. This time the central bank has given a big relief by reducing the repo rate by 0.50%. In such a situation, the rates of home loans, personal loans auto loans etc. will also be reduced. Since a home loan is a long term loan, people start feeling burdened after a while. Everyone wants to repay it as soon as possible. If you are also thinking of something like this, then there will be no better opportunity than this for prepayment. On one hand the bank will reduce the interest rate of your loan, on the other hand you reduce your principal amount by making prepayment. With this you can reduce the burden of home loan a lot. If you cannot make lump sum payment then there are other ways of prepayment. Know about this.

According to the information given on the website of Bank of Baroda, one way to prepay a home loan is to start with a small amount and keep increasing this amount every year at a fixed rate. For this, you will have to save a little every year. You can make prepayment from this amount of savings.

You can also reduce your principal by paying a fixed amount every year. You plan your expenses for the whole year and make a prepayment by paying a fixed amount every year. This will reduce your principal amount rapidly and your loan will reduce rapidly.

One way to reduce your principal amount through prepayment is to pay more than your calculated EMI. You will have to do this every month. This method is also very helpful in ending the burden of loan quickly.

If your financial condition has improved and your financial status is good now, then you can pay the entire amount of the home loan in one go before the completion of the tenure and completely finish your loan.

It matters a lot at which stage of the loan you are making the prepayment. In the initial stage of the home loan, the interest component in the EMI is the highest. In such a situation, if you make the prepayment in the initial period of the loan, then interest worth lakhs of rupees will be saved. This can reduce your EMI. But prepayment of loans in the mid-to-late stage cannot give you the full benefit of saving on interest. In such a situation, it is wise to invest the surplus funds.

Consider the decision to prepay your home loan only after understanding the cost of prepayment. Usually banks do not charge any prepayment fee on adjustable rate home loans, but prepayment fee may be charged on fixed rate home loans. Before prepaying your loan, learn about all the terms and conditions from your lender and then decide on loan prepayment.