Is prepayment of home loans a good idea?
by Finway FSC Empowering People FinanciallyAnyone
who has taken a home loan in Delhi or other similar metro cities will tell you
that it’s quite a burden to bear – especially if you belong to the middle
income groups. The pressure, however, is less financial and more psychological.
No one likes to live with a huge debt over their head. This is where prepayment
comes into play. Prepayment means paying back the lone, in part or full, to the
lending authority in order to take the advantage of low interest rates.
Also,
prepayment isn’t a novel concept either; it has been around for a while, but
people in India have been reluctant towards it – until now. Suddenly, we’re
seeing a rising number of borrowers who are preferring prepayment as a means of
returning the loan money to the banks. You must have heard though that
prepayment chokes the borrower’s cash flow; well, according to some of the most
erudite economic experts, it’s a myth! If you take the advice of the experts,
you can safely partly pay your debt by taking a disciplined approach and by
utilizing your bonuses and incentives. According to certain statistics, nearly
70% of all home loans that had an initial tenure of 20 to 25 years were repaid
within the first 7 to 9 years.
Why
should you consider prepayment?
As
far as prepayments go, you don’t need to wait for the windfall time in the
tenure. You can, instead, start making regular prepayments to denude the loan
away before the end of the tenure. According to economics experts, people who
are in their late 20s and early 30s have a higher probability of being done
with their home loan in Delhi and other mega cities within the
first seven years of the tenure; the reason is that these people work really
aggressively towards getting increments and bonuses and incentives, which
ultimately help in the prepayment process.
How to easily make prepayments
1. Begin with a smaller amount and
gradually increase it as per your financial growth.
2. Without reducing the EMI, decide
upon a certain sum of money that you’d be paying every year as prepayment.
3. If you trust your financial
stability, you can increase your EMI and chip away at your loan even faster.
Sponsor Ads
Created on Jun 4th 2020 23:07. Viewed 286 times.