Owning a home is one of the goals for any person. Most people buy a home through a home loan at the time of starting a job. Due to this, many people choose loans with low EMI, high interest rate, and long tenure. Doing so not only results in a large amount of loss in interest, but it also becomes a liability for a long period of time. By paying off the loan before the maturity date, homeowners can set aside their income for other investments or savings.

Benefits of Early Repayment

The biggest benefit of repaying your home loan early is reducing interest costs. This not only saves money, but also improves your debt-to-income ratio and improves your credit profile for future financial needs. Moreover, the peace of mind that comes from being free from significant debt is invaluable, giving you a strong sense of financial freedom.

Here are some tips on how to repay home loan faster:

Make a higher down payment

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

Make lump-sum payments when you receive bonuses

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

Increase EMIs gradually

Increase your EMI payments gradually as your salary increases or expenses decrease. This approach allows you to pay off the loan faster without affecting your monthly budget too much.

Create a 'loan repayment' investment plan

Create an investment plan that aims to repay a large amount towards your home loan every year or two. This disciplined investment will help you build a corpus specifically for loan repayment.

Refinance with low-interest, short-term options

Review your loan terms regularly and compare them with current market offers. Refinance your loan to another lender that offers lower interest rates or shorter repayment periods.

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 the surplus funds where they earn more interest rather than accelerating the loan repayment.