When you take a home loan, your property is used as collateral for the security purpose of repayment of debt. It is better to plan in the early phase before taking a home loan. There are times when faulty calculations have led to the extension of tenure, missed EMIs, etc. People who opt for multiple loans are adversely affected. Even a single miss in payment can malign their images on their credit report. At present, there are different banks and financial institutions that offer customized home loan repayment options that adjust to the needs of the borrower. Even some plans have elevated the repayment capacity of the borrower along with some tax benefits. Let’s take an insight into some effective strategies that manage your debt condition without putting much stress in your pockets.
Delayed EMI payments
In the beginning phase, there are borrowers that can’t make the payments. A home loan that offers delayed EMI payments is apt for such borrowers. You need to search for those banks and financial institutions that provide you with a Flexi pay option where can start repaying after 36-60 months. This time period is called the amortization period, and during this time, borrowers are required to pay any EMI but the pre-agreed rate of interest. This is an alternative course, where the borrower can start the repayment of the loan at a later period.
Increase repayment amount
Whenever a borrower sees that there is an additional flow of income, he should prioritize the repayment of the loan. If a borrower gets a 10% rise in his salary, he can easily increase the EMI’s payment by 6%. A minimum amount of Rs1000 can be increased every year to get rid of the burden of debt. A moderate increase in loan repayment can have a serious impact on reducing the time span of a loan. If someone has multiple loans, then the focus should be given to clear the costlier one.
Use investment for loan repayment
You can also utilize your investment schemes effectively in the repayment of your debts. Life insurance policy and PPF allows a borrower to borrow and pay off the existing loans. The borrower can fetch loans from the third financial year in a Pension Provident Fund (PPF), and the same gets repaid within three years. One can avail a maximum of 25% of the balance, and a nominal interest of around 2% is charged on the same. However, it can attract a higher rate of interest if the loans are not cleared off within 36 months. It is best to use your PPF only when you are in dire need of it; otherwise, such long term investment cum asset should be kept untouched so that the compounding interest works effectively.
Now, with options like balloon payment, a home loan owner can repay back the one-third loan amount in the last instalments. This course of action is perfect for borrowers who have very high financial requirements. The lump-sum amount is cleared at an interval of 5 yearly or at the last stages of a long-term loan. Though, it should be avoided as the borrower needs to pay a higher rate of interest compared to other plans and schemes.
Fixed and Flexible EMI plan
There are two ways of loan repayment. First is the fixed EMI plan, and the other is the flexible EMI plan. A fixed EMI plan is better as the amount remains the same and is generally not affected by the market fluctuations. Fixed-rate instalment plans are better for borrowers when interest rates are expected to get raised in the near future, but there are even companies that have provisions to increase the fixed amount after a particular time. Contrary to this, flexible EMI plans have provisions of the flexible rate of instalments, and this can vary with the market fluctuations. There may be an expansion or reduction in the EMI payment depending upon the market situations.
There are many customized options available in the market regarding home loans, but before getting your home loan approved, it is wise to calculate the repayment. Check and compare from the various options of home loan repayment and according to your financial situation, select the best one.