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News India Live, Digital Desk: Financial Planning: Buying your own house is the biggest and most beautiful dream of everyone’s life. But to fulfill this dream, most people have to go through a long journey, which is- Home LoanAs easy as it may seem to get a home loan, it can be equally difficult to repay it because more of the interest goes into it than the actual amount.
Have you ever thought that when you take a loan of Rs 50 lakh for 20 or 30 years, you actually pay the bank not Rs 50 lakh, but about Rs 80 lakh or Rs 1 crore? Yes, the remaining amount is only interest.
But if we tell you that by adopting some smart methods you can reduce the total cost of this Rs 50 lakh house. Only 27 to 30 lakh rupees (around the principal amount)? This is not a joke, but a miracle of smart financial planning, through which you can save lakhs of rupees paid to banks as interest.
So, let us know about those smart methods which will lighten the burden of your home loan.
1. Biggest bet: Make more down payment
This is the first and most effective way to reduce the burden of home loan. Generally banks give loan up to 80% of the price of the house and you have to pay 20% as down payment.
Smart Tip: Instead of 20%, try to make 30% or 40% down payment. The more money you invest initially, the less loan you will have to take. And the lesser the loan, the lesser the interest! This will reduce your EMI and your debt burden will also reduce.
2. Avoid the ‘trap’ of long tenure
Banks often offer you loans with a long tenure like 30 years, because in this your EMI appears very low. It looks very attractive, but in reality it is a ‘sweet trap’. The longer period you take the loan, the more interest you will have to pay.
Smart Tip: Choose the shortest loan tenure as per your pocket, like 15 or 20 years. Yes, this will increase your EMI slightly, but you will save lakhs of rupees in interest and will also be free from debt quickly.
3. Use ‘Brahmastra’: Loan Prepayment
This is the most powerful weapon to reduce your home loan burden. Prepayment means, whenever you get extra money from somewhere (like annual bonus, incentive or any other savings), deposit it directly in addition to your EMI to reduce the principal amount of your loan.
Smart Tip: If you prepay even an amount equal to one EMI in a year, you can finish your 20 year loan 3-4 years in advance and save lakhs on interest.
4. Do ‘negotiate’ on the interest rate
Do not depend on just one bank while taking a home loan. Compare interest rates of different banks. If your CIBIL Score is good, you can also negotiate with the bank to reduce the interest rate.
Smart Tip: If after a few years of taking the loan, you come to know that some other bank is offering loan at a much lower interest rate, then you can also choose the option of ‘Home Loan Balance Transfer’.
5. Do your calculations: Use EMI calculator
Be online before taking loan Home Loan EMI Calculator Must use. This will help you understand how much money you will have to pay in total at different tenures and interest rates. This will help you in taking a right decision.
By adopting these smart methods, you can make your dream home not a burden but a pleasant experience and invest your hard-earned money in the right place by saving huge amount of interest paid to the bank.