There is hardly anyone buying a house who has not taken a home loan. Home loans are categorized as ‘good loans’. Through this, not only do you make a property of its own, which keeps increasing with time, but it also proves helpful in saving income tax. Home loan principal gets benefits under Section 80C of Income Tax Act. At the same time, you get the benefit of Section 24B on payment of interest. Despite these benefits, home loans have to pay a major portion of their earnings as EMIs. Everybody wants their EMI burden reduced. Today we will discuss some such measures which will help in reducing your EMI burden.
Home loan prepayment
To reduce the burden of EMI of home loan, SEBI Registered Investment Advisor Jitendra Solanki advises that you should opt for pre-payment of home loan. Means lump sum payment of home loan from time to time. This reduces the amount of your loan and reduces the interest payable on it. Pre-payment in the early years of a home loan is a profitable deal. According to Solanki, you can reduce the interest burden by pre-payment when the EMI of a home loan has a higher interest rate in the initial years. He said that in the last years of payment of home loan, the benefit of pre-payment is not available.
Increase your EMI periodically
If your earnings increase then you can increase your EMI in proportion to that. Solanki says that this will speed up the payment of your home loan. Meaning, you will get rid of the hassle of paying EMI for the entire duration.
Home loan overdraft facility can be availed
Solanki says that customers can opt for home loan overdraft facility with their home loan account to reduce the interest rate on home loan. Under this facility, apart from your EMI, you can deposit additional amount in your home loan account. Keeping the additional amount in the account will reduce your interest amount and loan duration. Apart from this, you can also withdraw this additional amount from your account if needed. However, withdrawing money from a home loan account will increase the interest amount on your loan.
See home loan offers from other banks and housing finance companies
According to Solanki, if you want to reduce the burden of your EMI, then transfer the home loan to a bank or housing finance company that has a lower interest rate. This will reduce your EMI amount.