6 Smart Ways To Manage Your Home Loan EMIs

If you’ve taken a Home Loan or plan to take one, here are a couple of tricks up your sleeve to manage it better. Read on to know more.

Are you excited about moving into the house of your dreams? Yay! We’re happy for you too! Did you take a Home Loan to make this dream come true? That’s awesome! You now need to manage it well. Finally getting to move into your own house is nothing less than a dream come true.

While you prep for all the housewarming functions and make a list of people you want to invite, you must also know exactly how to manage your Home Loan. Here are six smart ways to manage your Home Loan EMIs efficiently.

Additional Reading: Why You Should Get A Home Loan Now

• Money management

Now, since you have a Home Loan to pay (and maybe a couple of other loans as well), it becomes even more important to manage your finances well. An important part of doing that is by getting your money management skills in place. You can’t keep messing your finances up and later blame it on other situations, people and what not. If you aren’t sure how to do it, don’t worry! We’ll guide you all the way.

For starters, you need to make a list of places you have invested your money in. This should include all those investments you have made like EPF, PPF, postal deposits and even ULIPs. The point is that you must know where your money is and where it’s going to go. If you have invested in places that are making you pay unnecessary interest, you need to close all those investments and focus on prepaying your Home Loan instead.

Saving a good deal of interest is any day better than paying at random places that are not even giving you good returns, isn’t it?

Additional Reading: Home Loans Are Cheaper Now. Make The Most Of It

• Say yes to a high EMI

Paying a high EMI can help you manage your Home Loan better. Now, you might think we’re kidding because how can paying more money every month possibly help you? Here’s how!

Opting for a high monthly payment can help you reduce the loan tenure. As a result, the total interest that you’re supposed to pay to the lender also goes down. So, technically, by opting to pay more every month, you’re reducing your own financial burden.

Moreover, it helps reduce the loan tenure as well, so that you get enough time later to focus on other important things in life. Like your retirement planning, for instance. You need to think about that too. You do want a happy, worry-free retired life, don’t you? So paying off that Home Loan as soon as you can is the best way out to make way for some other crucial things in life.

• Partial pre-payment. Ever heard of that?

Instead of following the usual EMI process and paying fixed amounts towards your Home Loan every month, you could opt for pre-payment. You could use any of those one-time incomes to prepay your Home Loan. For instance, if you got a promotion recently or one of your Fixed Deposits just matured, you could use those funds and prepay your loan. This will not only help reduce your loan obligation but will also reduce the loan tenure.

Like we mentioned before, paying off your Home Loan early can leave you with enough free time and resources to plan other things in the future. The best thing is that most of the leading banks don’t ask you to pay heavy charges when you opt for a loan prepayment. The charges are usually minimal. But just to be on the safer side, you must always enquire about the prepayment charges before opting for a particular loan offer.

• Switch to a lower rate of interest

Always keep your eyes open and closely monitor the trends in interest rates. As soon as you see a dip, you must think about switching to a lower rate of interest than your existing one.

Based on the interest rate reset period, different banks generally reduce their rates at different times. If the reset interest band of your lender is wide, you may be at a high interest rate for a long time after other banks have started to reduce their rates. So, the magic basically lies in being aware of what’s happening in the market. Switching to a lower interest rate than your existing one will shave a few years off your Home Loan.

You still need to be a little careful though. Why? Don’t jump too many times at low-interest rate differences. If you’re getting a good dip in the rate of interest, you should definitely consider switching. But in case the difference isn’t much, it might be a bad idea to go for that switch. A heartening detail though is the removal of the prepayment penalty. This can definitely boost the prospects of a Home Loan switch, easing the cost burden for the loan borrower further. Sounds like a great idea, doesn’t it?

• Get the math right

Do you know about the existence of loan calculators? Don’t worry! We know you hate dealing with numbers and complex calculations. That’s exactly why we thought of introducing you to these awesome instruments. These calculators can help you understand what loan amount you can sustain. They ask you a couple of questions to understand the situation of your finances and come up with solutions accordingly. The best part? They are simple, convenient and easy to operate. What’s better than getting to know everything about your monthly loan payments, cash down payments and interest rate?

After doing all the necessary calculations, these awesome calculators also help you determine which Home Loan product is the best option for you. After all, you need to opt for something you can financially handle, right? Getting all the calculations in place can also help you plan your other daily expenses accordingly. Since Home Loan EMIs are a crucial part of your monthly budget, you must be able to balance all your other financial commitments as well.

Additional Reading: Home Loan EMI Calculator: How It Works

• Missing loan payments? A big no-no.

No matter how bad your financial situation is, you need to find a way to pay all your Home Loan EMIs on time. Why? We don’t want you to make these payments on time just because we want you to develop some good habits. Well, we do want you to do that too, but the more crucial thing to consider here is your Credit Score. Missing EMI payments can severely affect your Credit Score and we’re pretty sure you don’t want that to happen, right?

A good credit history is an important part of your financial life. All lenders in future will judge you based on your Credit Score. Your credit history determines your credibility as a loan borrower. Whether it’s for a Credit Card or another loan, you need to have a good credit report to show. In case you fail to pay your Home Loan EMIs on time, your Credit Score takes a major blow. As a result, the chances of your loan and Credit Card applications getting rejected in future increase significantly.

You won’t want that to happen, right? That’s why you need to budget and plan your monthly expenditure properly. Planning and budgeting is the best way to ensure that you have enough left to make those EMI payments. At the start of every month, as soon as you receive your salary, just take your Home Loan EMI and keep it aside. Keeping it away from your salary account will help ensure that you don’t spend it on unnecessary things.

Bonus Read: Home Loans For The Self-Employed

If you keep all these tips in mind, managing your Home Loan will be a walk in the park for you. It’s all about managing your money right. If you can do that, there’s no chance whatsoever that you’ll miss your Home Loan EMI payments or find innovative ways of messing it up.

Haven’t applied for a Home Loan yet? What are you waiting for? We can help you get the best offers. Pinky promise!