Different Options Available for Home Loan Repayment

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home loan

Lenders today offer housing loans with attractive interest rates and exclusive repayment-friendly features. All these factors together contribute to the growing popularity of such loans in the debt market. However, it is vital for borrowers to have a complete idea about how to best repay the loan concerned.

The repayment of a loan is an important financial commitment. If not planned beforehand, repaying a loan could become a burdensome responsibility for a borrower. After availing the funds, individuals often look for various ways to avail of tax benefits on a home loan. Along with that, a borrower must consider the best possible options for housing loan repayment. Exploring these options enables him/her to pay off the loan in simpler ways.

Best home loan repayment options to choose from

Have a look at these repayment options to reimburse your home loan conveniently –

  • Step-up EMIs- In this option, the EMI amount increases as the loan tenor progresses. In the initial months of the home loan repayment, the borrower will have to pay a lesser amount as EMI. While in the months to follow, he/she will have to pay an increased sum as EMIs. This option is best suited for people who are short of funds while availing the loan and cannot afford to pay high EMI sums. Eventually, when his income and savings build-up, he can pay the comparatively higher home loan EMIs. People who have just started their career and yet to accumulate substantial savings can also avail of this option only after calculating EMIs before taking a home loan.
  • Step-down EMIs- As compared to the step-up EMI option, this allows monthly installments to decrease eventually as the loan tenor progresses. This would require the borrower to pay higher sums as EMI in the initial years and a lesser amount in the later years of the tenor. This home loan repayment option is great for individuals whose retirement is nearing so that they can pay off a major part of the loan when they have a steady source of income.
  • EMI holiday or moratorium period- Many lenders allow a moratorium period on home loan EMIs. This means that the EMI deduction from the borrower’s bank account will be delayed. Few months after the disbursal of the loan will be spared from EMIs. Moratorium period or EMI holiday comes as a considerable relief to the borrowers as during the initial few months of availing the home loan they have multiple expenses related to stamp duty, registration fees, etc. on the new home.
  • Pre-payment- Pre-payment of a loan means repaying it at the earliest. One can either make part-prepayment of the loan or prepay the entire outstanding loan balance. By considering certain important points while prepaying a home loan in easy ways, you can lower the upcoming EMIs significantly. Certain lenders charge a penalty fee on loan prepayment, which has to be taken into consideration before choosing this option.
  • Refinancing- Refinancing a home loan suggests availing a separate loan to repay the outstanding balance of the existing loan. The new loan to be availed will charge lesser interest rates, which will enable the borrower to repay it easily. This option also helps in enhancing the CIBIL score. While availing the new loan, it is advisable to take the help of a home loan EMI calculator for estimating the upcoming installments.

A borrower can also opt for repaying the loan in lump sum amounts when he has sufficient funds available, in order to shorten the loan tenor.Doing through research about all the home loan repayment options is extremely necessary to ensure that you do not end up as a defaulter. Paying off debts responsibly on time also helps in increasing one’s credit score.