When managing a home loan, one crucial decision borrowers often face is how to reduce their home loan tenure or EMI. This decision can significantly impact their financial health and long-term wealth-building strategy. To make an informed choice, it's essential to understand the implications of each option.
Home Loan EMI (Equated Monthly Instalments) are fixed monthly payments made to repay a loan within a specified tenure. They consist of both principal and interest components.
Home Loan tenure is the period over which the loan will be repaid. It is a critical factor in determining the total interest payable over the life of the loan.
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Caption: Home Loan Prepayment process
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Here are a few factors to consider when choosing between lower EMI or Loan Tenure -
Caption: Home Loan Tenure
The choice between reducing EMI or tenure is subjective and depends on individual financial circumstances and goals. If your priority is immediate economic relief and improved cash flow, lowering EMIs may be the preferred option. However, reducing tenure is likely more advantageous if you aim for long-term savings and faster debt repayment. Go to the IIFL Home Loans page and submit an online loan application to learn about cheap home loan interest rates.
You can shorten the term of your home loan by paying off the principal early, refinancing your loan, applying bonus money to your EMIs, and other strategies. However, one should know the penalties associated with prepaying home loans. One can shorten the duration of a home loan by lowering the amount owed and the interest paid out.
Reducing the EMI of your home loan is a smart financial move that can significantly ease your monthly financial burden. One effective strategy is to opt for a longer loan tenure, which spreads the repayment over a more extended period, resulting in lower monthly instalments. Additionally, making a larger down payment at the outset can reduce your principal loan amount, directly impacting your EMI.
Selecting a shorter loan term can help you reduce interest costs throughout the loan and assist in paying off debt. You can adjust the length of your home loan even if you choose a longer-term but would want to pay it off sooner, or vice versa.
Based on current rates, interest rates for houses are expected to drop by 0.5% to 1.25%. Current house loan holders might benefit more from the decline.
Utilise a home loan EMI calculator with prepayment to determine the EMI that will be lowered upon prepayment. Enter your loan information, including the prepayment amount, to utilise this tool. Your new EMI will be shown by the calculator using the lowered principal.
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