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This is How Your Loan Repayment Works!

This is How Your Loan Repayment Works!

Home loan is the most preferred financial model while owning a house. It is wise to opt for a home loan at a younger age; this helps to complete the repayment process before you retire. The quicker you may offload the burden of repayment of a home loan, the more financially comfortable will you feel.

How can you repay your home loan?

A prompt repayment of a home loan is important for generating a healthy credit score of an applicant. There are multiple options available to repay a loan. Equated Monthly Installment (EMI) is the loan repayment procedure followed by financial institutions. Each EMI is a combination of the principal loan amount and interest amount on the principal loan amount. The total repayment amount of loan is divided monthly across the tenure of the loan to determine the home loan EMI amount. Lenders fix a monthly date for the borrowers to repay the monthly EMI until the repayment of the total loan amount with interest is complete. While during the initial years, the interest component is higher on the monthly EMIs, in the later years of home loan repayment, the component of the principal amount becomes higher.

Different repayment options of home loans

With Indiabulls Home Loans, the applicants may opt for three different ways of repayment to reduce the burden of home loan EMI.

  • The applicants may opt to pay higher monthly EMIs. This helps in repaying the principal amount of the loan faster; which decreases the cost of the loan by bringing down the interest rates.
  • The borrowers may offer a one-time partial prepayment of the loan. This reduces the burden of principal loan amount along with the interest rates on the principal. At Indiabulls Housing Finance, we do not deduct any prepayment charges if the prepayment amount is up to 25 percent of the principal loan amount. However, it will attract prepayment charges as per the agreed loan terms, if it exceeds 25 percent of the principal loan amount within 12 months of such payments. Such part payments may be made through the Indiabulls Home Loans’ customer portal with the help of a debit card, net banking, or Unified Payments Interface (UPI).
  • The applicants may often choose to increase the monthly EMI of their home loans as their income grows. This quickens the repayment process with an additional infuse of funds to the EMI.

How EMIs help you plan your finances

Apart from being a type of payment method for any type of loans, EMIs immensely help in your financial planning.

  • Since your financial goal is to seek freedom from the burden of your home loan, an EMI puts you on a tight monthly budget.
  • Personal emergencies may knock at any time; so, it is wise to have a corpus to pay for the EMIs.
  • Before agreeing on an EMI, ensure that your home loan EMI is not more than 40% of your monthly income.
  • With the benefits of home loan transfer schemes and opportunities to avail of lower interest rates, monthly EMIs maybe brought down considerably.

As mentioned earlier, a timely home loan repayment is extremely important to maintain a healthy credit score. This will help you in getting better deals from the financial institutions on your future loan and credit card requirements. Therefore, you must be particular about repaying the home loan at a period committed to the lender.

The post This is How Your Loan Repayment Works! appeared first on Indiabulls home loans.

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