{"id":12308,"date":"2023-08-28T13:44:10","date_gmt":"2023-08-28T13:44:10","guid":{"rendered":"\/blog\/?p=12308"},"modified":"2024-07-04T19:05:31","modified_gmt":"2024-07-04T13:35:31","slug":"dos-and-donts-for-a-home-loan-prepayment","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-home\/dos-and-donts-for-a-home-loan-prepayment\/","title":{"rendered":"Dos and Don\u2019ts for a Home Loan Prepayment"},"content":{"rendered":"\n

Prepaying loans is a good way to get rid of debt sooner rather than\nlater. Especially if your monthly income has recently increased, you may be\nconsidering reducing your liability by prepaying a loan. While it sounds like a\nfinancially responsible thing to do, when it comes to prepaying a home loan, things can get a little tricky.  <\/p>\n\n\n\n

If you are looking to prepay your loan, follow these home loan prepayment rules to make things\neasier.<\/p>\n\n\n\n

Dos for home loan prepayment <\/strong><\/h2>\n\n\n\n

1. Carefully choose the lender<\/h3>\n\n\n\n

When looking for a home loan provider, it\u2019s important to make a\nchoice based on its home loan\nprepayment rules and policies. Always go for a lender that offers\nreasonable prepayment terms and doesn\u2019t extract exorbitant charges.<\/strong><\/p>\n\n\n\n

2. Prepay as early as possible<\/h3>\n\n\n\n

Most lenders use the reducing balance method to calculate the\ninterest component. This means that the interest amount is higher in the\ninitial stages of repayment and keeps reducing towards the end of the tenure.\nSo much so, that the first few EMIs are made up almost entirely of the interest\ncomponent. Since the whole idea behind home\nloan prepayment is to save the money that you would otherwise pay as\ninterest, it makes sense to prepay your home loan as early as possible. The\nsooner you pay off the loan, the more you save.<\/p>\n\n\n\n

To estimate your EMIs, use free online tools like home loan EMI calculators<\/a> to plan ahead.<\/p>\n\n\n\n

Additional Read: <\/strong>How\nto Repay Home Loan Faster<\/a><\/p>\n\n\n\n

3. Do the math<\/h3>\n\n\n\n

While there are undeniable benefits\nof prepayment of home loan, it is not always the right way to go. Calculate\nthe returns you could be making with the prepayment amount if you were to\ninvest it elsewhere. Compare that with the interest you\u2019ll be saving by\nprepaying the loan. See which one outweighs the other and then make your\ndecision.<\/p>\n\n\n\n

Don\u2019ts for home loan prepayment <\/strong><\/h2>\n\n\n\n

1. Prepay within the lock-in period<\/h3>\n\n\n\n

Most lenders have a lock-in period for non-floating home loan interest rates<\/a>. This\ncould be anywhere between 1 and 3 years. If you decide to make a prepayment\nduring this period, you might have to pay a penalty.<\/p>\n\n\n\n

2. Forget to consider the tax savings<\/h3>\n\n\n\n

Both the principal and interest components of home loans offer numerous\ntax benefits and rebates, which you would be giving up if you were to prepay\nthe loan. <\/p>\n\n\n\n

3. Forget to collect the acknowledgement<\/h3>\n\n\n\n

You must collect the acknowledgement slip for prepaying the home loan. An\nacknowledgement is nothing but a written proof of the fact that you\u2019ve made a\nprepayment. It also mentions the principal outstanding and the remaining\ntenure. Also, remember to collect all your unused post-dated cheques from the\nlender to make sure they don\u2019t fall into the wrong hands.<\/p>\n\n\n\n

If you are considering home\nloan prepayment, there are many factors you will need to meticulously consider.\n<\/p>\n\n\n\n

Additional Read: <\/strong>5 Things to Keep in Mind Before Prepaying Your Home Loan<\/a><\/p>\n\n\n\n

If you\u2019re looking for a reputed lender with fair home loan prepayment rules, visit Tata Capital. With attractive interest rates and years of experience in the industry, Tata Capital is the right home loan<\/a> provider for you. Visit our website to check your home loan eligibility<\/a> today. <\/p>\n\n\n\n

Apply For Home Loan<\/a><\/div>\n","protected":false},"excerpt":{"rendered":"

Prepaying loans is a good way to get rid of debt sooner rather than later. Especially if your monthly income has recently increased, you may be considering reducing your liability by prepaying a loan. <\/p>\n

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