Home Loan EMI Reduction Tips: Getting a home loan is easy, but repaying it quickly is the biggest challenge. Paying EMIs can sometimes feel like your entire life. But if you adopt just one smart trick, you can finish your home loan 3 to 7 years faster. This method is considered quite practical, but most people don’t follow it. Let’s find out what this trick is and why it’s so effective.
What is the trick to repaying your home loan quickly?
This trick involves paying just one extra EMI every year. This trick is so effective because most banks deduct more interest from you in the initial years of your home loan. Adding just one EMI every year directly impacts your principal, loan tenure, and total interest. It’s a small amount, but the impact is significant.
How many years will one extra EMI reduce your home loan?
This depends on your loan amount and interest rate, but on average, a 20-year loan can be reduced by 3-5 years, and a 25-year loan by 5-7 years. This can result in savings of up to ₹5-12 lakh in total interest. Just one EMI per year can be a significant benefit.
Where will the extra EMI come from to repay your home loan?
- Withdraw one EMI as soon as you receive an increment or bonus. You can add extra money by withdrawing EMIs from your annual salary increase.
- You can make a prepayment directly upon receiving your income tax refund.
- Extra income received during festive seasons like New Year’s Day and Diwali, or cash gifts, can be converted into EMIs.
- You can eliminate unnecessary subscriptions of ₹500-1500 and pay EMIs throughout the year.
Do banks allow extra EMIs?
Almost all banks offer prepayment options. Just keep in mind that home loans (at floating rates) don’t attract prepayment charges. A small request is all you need to make, and the extra EMI should always be added to the principal.
Does increasing EMIs have any benefits?
According to financial experts, if possible, consider increasing your EMI by 5-10%. This can also reduce your loan term by 2-3 years each year, but the easiest way is to pay one extra EMI. If you can’t manage your monthly budget, try paying one extra EMI a year.
Disclaimer: The information provided in this article is for general financial education purposes only. It does not constitute financial, tax, or investment advice. Before making any home loan decisions, such as prepayment, increasing EMIs, or changing the loan structure, please consult your bank, financial advisor, or loan manager. Loan amounts, interest rates, income, and financial circumstances vary, so results may vary.
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