6 Tips to Reduce the Burden of Repaying your Property Loan

by Atish Nair Consultant, writer

If you are applying for a property loan, it could be one of the biggest financial decisions you have taken yet. Applying for a loan is a great way to accomplishing your goal of owning a home. But, when it comes to repaying the amount, it is not always easy to handle the EMIs. To ease the burden of the repayment, here a few tips that you can consider.

Increase the down payment

One of the best ways to make the loan repayment easier is to opt for a higher down payment. If you are applying for a loan to buy a property, it is advisable that you pay more than the minimum required amount as a down payment. This would help you borrow less, which means the lower interest on EMI payments and less repayment stress.

Apply for a shorter duration

A lot of people in their attempt to ease the loan repayment tend to increase the loan duration. However, this means that you would have to keep paying the EMIs for a longer period. So, while applying for a loan, it is advisable that you assess your financial condition; if you foresee any possibility where your income would increase or you would get a lump sum amount, choose a loan for a shorter duration. You can use the EMI calculator to calculate to know exactly the EMI you would have to pay for the duration you choose.

Consider prepayment

Another effective to repay your loan faster is to prepayment. If you foresee any opportunity where you can have surplus cash, you can use the money to prepay part of the loan amount before the tenure. This will reduce your principal amount and reduce your overall interest payment. However, you must know that, when you prepay, the banks charge a penalty fee, which is usually about 1% of the amount prepaid.

Increase the EMI amount

Many financial experts suggest that loan borrowers must consider increasing their EMI payments as their annual income increases. You can consider increasing the EMI by a small percentage every year to save the overall interest paid. As you increase the monthly payment, it would have a significant impact on repaying the full amount faster.

Additional EMIs

Apart from increasing the EMI amount, you can consider paying an additional EMIs to help repay the loan faster and save the interest paid. If you are a salaried employee, you may get an annual bonus; you can use the amount to repay your loan.

Get the benefit of MCLR

As per the mandate passed by the government of India, all property loan availed after 2016 are subject to follow the Marginal Cost Lending Rate (MCLR). According to this rule, the borrowers are given the benefit of the change in the interest rate. So, if you have availed a loan before 2016, you can switch to MCLR subject to paying the conversion and fee and get the benefit of the lower interest rate. Also, you use the loan portability facility to port your loan to another lender who has a lower interest rate.