The home loan makes it easy for individuals to houses of their dreams. Hence, it is imperative to accumulate all the information before applying for a loan so that one can effectively manage it. Home loans are serious financial commitments and should be taken up only when you are confident that you can manage them alongside other expenses. With a little planning, you can do both, enjoy life and live within your means. Here are some tips that can help you with home-loan management:
Money management
Since you have a home loan to pay, it becomes important to manage your finances well. An important part of doing that is by getting your money management skills in place. If you aren't sure how to do it, you can always consult your CA for guided assistance.
Never miss the instalment
You should manage your earnings and expenses in a way that monthly instalments or EMIs can be paid on time without missing any. Being punctual enhances your creditworthiness and keeps your financial journey on point. It also becomes easier to avail loans in the future, because your credit score impacts your credibility in the eyes of future lenders. So, if you miss out on an EMI, it harms your credit score and spoils your chances of future loans or credit card requests. The best way to ensure timely payment is to schedule an automatic payment mode close to pay day. By then, you will have sufficient funds in your account. This minimises the chances of defaulting due to a lack of funds.
Pay an extra annual EMI
This may be difficult in the initial phase but pays off in the long run. Try to pay an extra EMI every year, as there is no prepayment charge for floating rate term loans involved. This way, you can reduce your principal outstanding amount at large.
Prepayment Helps
Prepayment of the loan amount is preferred by a lot of people because it reduces the stress as well as frees the financial burden and accountability. The best way to complete your loan is to pay lump sums or more than your EMI, this way the loan tenure will be reduced. Prepayment of a loan is also an advisable option because it helps you save interest. By paying extra every month, you can reduce the financial burden in the long run, which opens new prospects for investment.
Switch lender if need be: A situation may arise where you find that the expenses for the home loan are too high. At this point, it is recommended that you look for a lender that offers a lower rate. Different lenders lower their rates at various intervals, keep a lookout for that and make the switch. However, experts advise not to switch repeatedly as it may affect your credit score.
Priorities and schedules: An important tip is to make repayment your top priority. Paying the EMI within the stipulated time enhances your credibility with that particular bank.
While these points should be kept in mind, the foremost tip is to study the market well before availing the loan. Thorough research about different schemes offered by different banks is imperative. Along with the interest rate, you must also enquire about the processing fee and other miscellaneous charges so that the calculations can be based on accurate figures. Generally, most banks have a processing fee of two per cent on home loans. It is prudent to make your calculations and not just rely on the numbers given by the bank. So, if managed wisely and carefully, home loans can be paid off without much hassle.
(Rishabh Siroya, Founder of Legend Siroya, President-Elect Naredco NextGen)
