Tips to manage Home Loan EMI effectively

Home loans are a convenient option when it comes to arranging finances for home. This convenience comes at a cost of EMI (Equated Monthly Installment), to repay the loan, a borrower has to pay EMI to a bank for a fixed period of time. Skipping the home loan EMIs can be a risky affair, not only the lender will send the borrower a notice but it will also impact the credit score permanently. So, it becomes a priority for a borrower to manage the EMI effectively, the two most important things are financial management and discipline.

Here are a few tips which can help a borrower to manage EMI effectively:-

1. Go with a cheaper interest rate

Applying for a home loan is not a one day process, it involves a lot of research before selecting a lender. There are various factors which are considered while selecting the lender, like interest rate, processing fee, customer care service and much more. The prime factor among these is the interest rate, as interest is related to the EMI. Lower the interest rate, lower the EMI; higher the interest rate, higher the EMI. So, one must opt for a lender who offers a low-interest rate. Having said that it is also important to consider the other factors but one has to find a balance.

2. Create a separate fund and make a schedule

When a borrower goes to a bank for a loan, then he/she should have enough balance in their account that they make the EMI payments for 3-4 easily. While you create a separate fund you should also make a schedule to make the payments on time. Set a reminder of a date when you have to pay the EMI and that date should be 2-3 before the actual payment date.

3. If possible pay higher EMI

At first, it might look like a challenge, but to repay the loan as soon as possible paying higher EMIs could actually help. Before you avail a loan, make sure to decide the amount of EMI after evaluating your finances, if your finances allow then you should pay higher EMIs to be debt-free before the tenure gets over.

4. Make partial payments

To reduce the loan tenure, one can make partial payments in between the tenure, however, it should be extra from the EMI. If one can make the part payments then they should try to make payments in the early years because during that time the principal amount is high. These payments can be done if a borrower gets bonuses or appraisal any time from their offices.

5. Use EMI Calculators

To get an estimate of your EMI, it is advisable to use EMI calculator, it gives an idea of how much EMI will a borrower have to pay every month. There are various banks and NBCFs which offers the facility of EMI calculator. The calculator also gives an estimate of other payments like principal amount, interest amount and the total amount which will be paid. This tool has been considered effective for years as it helps manage home loan effectively.

6. Change lender if needed

Once you take a home loan, you should always keep a check on the interest rates which is offered by the lenders, especially if you have opted for the flexible interest rate. The interest rate on home loans also changes from time to time as per the guidelines of Reserve Bank of India. In case you feel that your lender is charging a higher rate of interest you can switch to a lender who charges a lower of interest rate, this can considerably lower the EMI and help you manage the EMI in a better way. However, the lender charges a fee for the same process.

7. Pay more down payment

To reduce the burden of EMI, it is suggested to make larger down payments. For example, most of the banks provide 70 percent- 80 percent as the loan amount, so in that case, you should select 70 percent as the loan amount and pay rest of the 30 percent as the down payment. Higher the down payment amount, lower the EMI.

Bottom line: To save your face in front of a lender and avoid default, you should follow these steps, this will definitely help you manage home loan EMI effectively. These are the few simple tricks to be followed to be stress-free from debt.