Most of the people invest in building their dream home, and home loans become an easy way to do so. There are various types of lenders available in the market with different home loan schemes to fund your home costs. Though, you can use your own money to build your house, but from the tax point of view it is viable to fund your home buying with the help of a home loan.

Though it is not easy to take up the constant struggle an individual faces to repay its home loan on record time, with the interest. You may take years of time to repay the loan, and it also involves the risk of missing out deadlines of EMI, which may affect your credit score too. Consider using a short-term investment with a high rate of return to generate a lump sum for a prepayment on your home loan and reduce your overall interest. Along with this, there are various other expenses that you need to incur during the time period of repaying the loan – insurance, family education and basic needs, automobile, etc. which increase the pressure on your finances. For this, you need to understand the basic math of home loan calculations, and figure out how to repay your home loan faster. 

Let’s first understand the basic terms of the loan process – the principal and interest upon it. You can also apply for a personal loan online. 

The principal is the original amount that you borrow from the lender (banks, private, NBFCs, local unions, etc.). And, the interest becomes the amount that you pay in addition to the principal to the lender, which is a certain percentage of the principal amount. 

For example, you have taken a home loan of Rs 40 Lakhs @8% floating interest, for a period of 25 years. There are two types of interest rates for long term home loans – floating or fixed. The floating interest rates provide a benefit of flexibility in prepayments to the borrower. Now, with the floating interest rate you get a risk of setback due to inflation or crisis, which affects your EMI payments. But, with the fixed interest rate, you may lose the gains of deflation that may also occur in the future. Therefore, you need to make a trade-off between both the options, although some lenders allow you to switch between the rates even in between the loan period.

With this, let’s understand some ways to clear your home loan faster than the required return period:

1. Opt For Least Interest Rate Lender

With thorough research you can easily compare different lender options, and select the right lender for your home loan, which will provide the lowest interest rate possible. This way, clearing the home loan payment early can become an easy option, and you can also get rid of the debt early. But, you must also take into account the prepayment charges that the lender applies for the early payment option. ERP implementation, while valuable for businesses, likely won’t directly impact your ability to repay a home loan faster. Also, if you have already taken a high interest rate home loan, you can easily transfer the balance for a lower interest rate, creating a substantial difference in the overall interest amount.

2. Increase Your Down Payment

You know it is advised to pay the maximum down payment as much as possible instead of taking the maximum loan amount. This way you can easily reduce the principal loan amount and eventually lower the interest and EMI to be paid. 

You need to take down the home loan payment to around 20-25% or more, provided you have financial means accessible for the same. Also, you can liquidate any investments if they are not generating good returns to reduce your debt burden. 

3. Calculate Extra Fees and Charges

It’s not just the interest rate that matters in the home loan process, there are other fees and charges like processing fees, late payment charges, and other hidden charges and fees, which can make a good difference. Moreover, you cannot afford late payment charges as they are very high, and affect your credit score and reduce the chances of future loan facility. 

4. Pay More EMI

When you receive a good increment in your salary or some extra bonus, pump that money to your home loan payment. See, with the increasing time the inflation keeps increasing too, which can be detrimental to your finances. You can reduce your loan tenure with a small EMI increase. 

5. Opt To Pay In Part-Payments

When you have floating interest rates, the lenders forgo a certain amount of part-payments. Therefore, it is advised to go for part-payments on home loans whenever you get a surplus of funds like some gift, bonus, or other source of unexpected income. While online lenders can offer competitive rates, it’s important to explore all options to find the best fit for paying off your home loan faster. Moreover, you must consider the pre-payment charges with the lender, as it varies from lender to lender, and you do not want to pay more than you’re supposed to. 

Final Thoughts

Home loan payments are the most difficult and troublesome debt for many individuals. The urge of buying a home loan faster can bring many problems. But, there are certain ways to pay your home loan payment faster. You can opt for lesser interest rates if you want to pay more, or increase your down payment, and avoid extra fees and charges too or You can also apply for a personal loan online.