Whenever the applicant takes a loan, it is mandatory for the buyer to repay the EMI on time before the due date is over. The loan installments payment should be given due importance as the late EMI payment may attract a penalty to the borrower. If the borrower stops paying EMI, the borrowers may be liable to pay a fine, and the CIBIL score may worsen if the borrower does not pay EMI on time or else refuses to pay. The borrower should ensure sufficient savings in their bank account to repay the home loan EMI on time.
Before opting for the loans, the borrower should ensure that he/she should have sufficient funds to pay the EMI and have stable income prospects. In case of default of the loans, the borrower may have to mortgage the property or surrender if unable to pay the EMI. The loans can help the buyer opt for tax benefits from the income tax department up to the exemption limit prescribed under the income tax act 80C.
Following are the ways to manage home loan EMI:
· Scour cheaper interest rates:
This is the first and foremost recommended step of research before opting for a home loan. It is advisable to compare the interest rates and zero in on bank offers the cheapest one on your home loan, so that the EMI is not an issue on the same.
· Prioritise and schedule:
Another important tip is to make your re-payment a top priority, as paying the EMI within the stipulated time-frame enhances credibility with that particular bank. The wise thing to do to schedule a payment close to your due date to avoid default due to insufficient funds in your account. As mentioned, you must never miss your EMI as it may lead to downfall of CIBIL ratings, thus restricting the borrower from opting for future credits.
· Try keeping a high amount:
While this might seem like a challenge, the borrower should try to maintain the high amount of bank balance to clear your dues before home loan tenure ends and generate the equity to increase the loan amount.
· Opt for lump-sum:
Experts always suggest using maturity proceeds or bonuses for pre-paying the parts of the EMI on the lump sum. This process helps in repaying the loans in a faster way. These consider to a large extent in reducing the loan tenure considerably, especially if paid during the loan tenure.
· Use EMI calculators:
Several banks that offer home loans also have an essential feature, their EMI on home loan installments you can pay every month, basis your income, expenses, and several other factors. Moreover, it provides accurate insights into EMI payments, interest rates, and the cash down payment for the loan. All of this makes it a practical proposal to clear the home loan quickly.
· Switch the lenders if required:
It is a situation that will arise wherein you will find the expense for servicing is too high. It is recommended that the borrower should check for an alternate option by transferring the loan to another lender. Multiple competitor companies provide attractive floating interest rates to home buyers.
· Pay an extra EMI:
This may come across as complex in initial phase, but it pays off in the long haul. The borrower can set an sip on an annual basis which provides better dividend payouts to the borrower thus repaying the debt in a faster way. Through this you can extend the principal outstanding amount at large. If this is planned diligently, it will be easy to manage EMI efficiently.
· Try partial pre-payment:
The longer the duration higher would be the EMI re-payment required. Thus the pre-partial payment of a lump-sum amount can help the borrower reduce debt. The borrower’s various source of funds are fixed deposits, asset sales, selling off the mutual funds or stocks which the funds can be used to repay faster EMI’s.
Thus we can conclude that the borrower should repay the loan in a faster way. Therefore, reducing the debt by pre-payment of the loans faster and availing the benefits of payment of lower interest on the principal amount. The borrower can also make provisions for the early re-payment by withdrawing the funds from fixed deposits, public provident fund, stocks, mutual funds, .etc. To do faster re-payment of loans. The borrower should take care that the monthly EMI should never be delayed
or skipped as it can result in the reduction of CIBIL score, thus restricting the future benefits of credit benefits.