Building a home is one of the most important goals for any person. Most people take out a home loan when they are at work. This is the reason why many people opt for loans with low EMI and high interest rates. In doing so, you will not only lose a large amount of money, but also become a liability for a long time. If the loan is paid off before the end of the term, the homeowner can set aside their income for other investments or savings.

Advantages of early repayment

One of the biggest benefits of paying off your home loan early is the reduction in interest costs. This not only saves money, but also improves your debt-to-income ratio and improves your credit profile for future financial outgoings. Moreover, the peace of mind that comes from getting rid of significant debt is invaluable, providing a strong sense of financial freedom.

Here are some ways to pay off your home loan early:

Pay more down payment

If possible, making a down payment of more than 20% will reduce your loan amount and thereby reduce the overall interest burden. This strategy will help in faster loan repayment and less financial stress.

Make lump-sum payments when receiving bonuses

This can be used to reduce the amount of your principal loan when you receive annual bonuses, tax refunds, or other lump-sum payments. This will not only reduce the interest burden but also reduce the tenure of the loan.

Increase EMIs regularly

Gradually increase your EMI payments by increasing salary or reducing expenses. This approach allows you to pay off the loan quickly without greatly affecting your monthly budget.

Create a loan repayment plan.

Create an investment plan with the goal of returning a large amount of money to your home loan every year or two. Making this investment with discipline will help in building a corpus specifically for loan repayment.

Refinance with low interest and short-term options

Review your loan terms on a regular basis and compare them with current market offerings. Refinance your loan to another lender that offers lower interest rates or a shorter repayment period.

Deciding to repay your home loan early is an important decision that requires careful consideration of your overall financial situation. However, considering that home loans generally have lower interest rates than other types of loans, it can sometimes be more profitable to invest surplus funds where they earn more interest, rather than to speed up loan repayments.