Home LoanTips: The smartest formula for paying off your home loan quickly: These repayment tricks will change your life..

Everyone dreams of owning a home. But many people may have to take out a home loan for 20 or 25 years to make this dream come true. Initially, the EMIs seem easy to manage, but over time, the burden becomes overwhelming. Many people wonder if it's possible to repay this loan before the due date. The answer is yes...

The longer a home loan lasts, the more interest you pay to the bank. In the initial years, a large portion of your EMI goes towards interest, and the principal balance reduces very slowly. If you make prudent extra payments early on, the total cost of the loan can be reduced by lakhs of rupees. Furthermore, when the monthly EMI burden is reduced or eliminated, peace of mind automatically comes. This also makes planning for the family's future, such as children's education, investments, or retirement, easier.

Place the extra money in the right place.

People often receive bonuses, increments, or tax refunds, which they spend. If this money is invested in a home loan, the principal balance depletes rapidly. Banks call this part-prepayment. The advantage of this is that the loan tenure is automatically shortened, significantly impacting the interest.

Small Increase in EMI, Big Benefit
If your salary is increasing every year, it makes sense to increase your EMI slightly. For example, if you increase your EMI by 5 to 10 percent every year, the loan can be repaid several years earlier. This method is especially effective for those whose income grows slowly.

Loan Repayment through SIP: The Wise Double Benefit
A smart way to repay your home loan quickly is through a SIP (Systematic Investment Plan). If your home loan has a low interest rate and you invest the same amount in a good equity mutual fund through a SIP instead of making a direct prepayment, the long-term returns can exceed the loan interest. Once the fund has built up a good corpus, you can make a prepayment using that amount. This way, you can repay your loan faster and also benefit from additional investment income.

Small Steps, But Effective Results
You don't necessarily need to make a large deposit at once. Even a small prepayment once or twice a year can make a big difference. Even a small prepayment during festivals, year-end, or from additional savings can significantly reduce the loan tenure.

Keep an eye on the interest rate.
If market interest rates are falling and a cheaper loan is available from another bank or NBFC, you may consider transferring your home loan. This may reduce your EMI or provide an opportunity to repay the loan earlier. However, it's important to understand all the charges and terms before transferring.

Know some important precautions.
While repaying your loan quickly is good, it's not wise to throw away all your savings. It's important to have a separate fund for medical emergencies or any unforeseen events. Also, check if there are any prepayment charges on your loan. Neglecting investments and insurance is also not a good idea; maintaining a balance is essential.

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