6 Tips On Managing Your Home Loan Without Stress
Once your home loan starts, it becomes even more important to manage your money wisely. Begin by checking where your money is currently invested, be it EPF, PPF, FDs, ULIPs, or other instruments
Moving into your new home is an exciting feeling that also brings a deep sense of accomplishment. You’ve worked hard, possibly taken a home loan, and now you’re finally in a place you can truly call your own.
But in the middle of all the celebrations and housewarming plans, it's important to take a moment and think about the responsibility that comes with a home loan. It’s something you’ll be paying off over the next 20 to 30 years. Managing it well can make your homeownership journey easier and less stressful. Here are a few simple and practical tips to help you stay on top of your loan and your money.
Understand Where Your Money Is
Once your home loan starts, it becomes even more important to manage your money wisely. Begin by checking where your money is currently invested, be it EPF, PPF, FDs, ULIPs, or other instruments. Some of these may be giving you very low returns or might even be costing you extra in fees.
If that’s the case, it may be better to redirect some of that money toward prepaying your home loan. Reducing your interest burden now might be more helpful than holding on to investments that aren’t really growing. The idea is to be aware and smart with how your money works for you.
If You Can, Consider Paying A Higher EMI
Choosing to pay a slightly higher EMI every month can actually help you in the long run. That’s because a higher EMI reduces your loan tenure, meaning lower interest outgo.
If your monthly budget allows it, this can help you close your loan earlier. That frees up money in the future for other goals like retirement planning or your child’s education.
Keep An Eye Out For Better Interest Rates
Home loan rates don’t stay the same forever. For instance, the Reserve Bank of India recently reduced the key repo rate to 5.5 percent. In response, many banks cut interest rates on home loans for both new and existing borrowers.
This is why it’s important to stay updated. If you still have a long way to go on your loan, you could explore switching to a lower rate. But don’t jump at every small difference. Make a move only if the new rate is meaningfully lower and the switching cost is minimal. Also, check how often your bank resets the interest rate. If it takes too long, you might be stuck with a high rate even when market rates drop.
Never Miss An EMI
Missing or delaying your EMI is stressful and can also affect your credit score. A poor credit history can make it tough to get loans or credit cards later on.
To stay safe, plan your budget well. As soon as your salary comes in, keep your EMI amount aside. If possible, park it in a separate account to avoid spending it. You can even automate the payment so that it goes out on time every month, without fail.
Use Surplus Funds For Part-Payments
If you get a bonus, tax refund, or money from a maturing FD, consider using it to make a one-time prepayment on your loan. This can lower your principal, thus reducing your EMI or loan tenure. Just check with your bank beforehand about prepayment charges, though most banks don’t have such penalties anymore.
Try Out Loan Calculators
There are plenty of simple online calculators that can help you understand how much EMI you can afford, based on your income and budget. These tools can also help you choose the right loan product and plan your money better. You can also get a clearer picture of what your monthly EMI looks like and how it fits into your overall expenses.
Owning a home is a big achievement. Managing your home loan well helps keep it a happy and stress-free experience. With a little planning and discipline, you can enjoy your new home without worrying too much about your loan.
(The author is the CEO at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
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