{"id":25926,"date":"2023-08-28T14:16:13","date_gmt":"2023-08-28T14:16:13","guid":{"rendered":"https:\/\/tata-blog.osian.dev\/blog\/?p=25926"},"modified":"2024-07-02T19:59:55","modified_gmt":"2024-07-02T14:29:55","slug":"prepaying-a-home-loan-good-idea-or-bad","status":"publish","type":"post","link":"https:\/\/tata-blog.osian.dev\/blog\/loan-for-home\/prepaying-a-home-loan-good-idea-or-bad\/","title":{"rendered":"Prepaying a Home Loan – Good Idea or Bad?"},"content":{"rendered":"\n

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However favourable your home loan interest rates<\/a> or terms are, paying EMIs will always be a hassle. That\u2019s why many people prefer foreclosing their loans to save on interest. After all, you no longer have the stress of debt weighing you down.<\/p>\n\n\n\n

But have you ever considered the downsides of early repayment? Well, it may come as a surprise, but prepaying home loan does come have many shortcomings. Let\u2019s understand the pros and cons in detail<\/p>\n\n\n\n

Pro #1: You go debt-free<\/strong><\/h2>\n\n\n\n

As mentioned earlier, repaying your loan before the end of tenure allows you to go debt-free. Not only does this take a huge load off your finances, but it also offers you peace of mind. By doing so, you can also think about your financial goals in a less constrained manner. Lastly, with the debt off your name, you can now also take up other forms of credit without burdening your budget too much.<\/p>\n\n\n\n

Additional Read:<\/strong> Dos and Don\u2019ts for a Home Loan Prepayment<\/a><\/p>\n\n\n\n

Con #1: You hurt your credit score<\/strong><\/h2>\n\n\n\n

It may shock you that repaying your entire loan amount before time doesn\u2019t reflect positively on your credit rating. Why? Because credit rating agencies prioritize your debt management skills more than your punctuality. If you\u2019re good at handling debt, it bodes well for your rating.<\/p>\n\n\n\n

However, if you clear all the credit on your name by foreclosing, the agencies no longer have anything to judge your credit management skills. In a nutshell, credit agencies prefer active accounts more than closed accounts.<\/p>\n\n\n\n

Pro #2: You save on interests<\/strong><\/h2>\n\n\n\n

Though closing a loan does take a toll on your credit rating, the impact isn\u2019t too drastic. Moreover, foreclosing saves you a considerable amount that would have instead been spent in servicing the interest. That said, the magnitude of your savings also depends upon how long you\u2019re into the tenure.<\/p>\n\n\n\n

If you\u2019re foreclosing relatively early, you can save a ton. If you\u2019re too late into the tenure, it\u2019s best to hold off until the tenure is up. Why\u2019s that? Because of prepayment charges.<\/p>\n\n\n\n

Con #2: You\u2019ll have to pay prepayment charges<\/strong><\/h2>\n\n\n\n

Let\u2019s face it; when you foreclose the loan to save on interests, it\u2019s the lenders that are losing money. As a result, many loan providers charge a prepayment penalty. These usually range between 2.5% – 6% of the total loan amount.<\/p>\n\n\n\n

So, even after prepaying the home loan<\/a>, you end up saving nothing. In fact, if you foreclose too late into your tenure, you may also end up losing money. That\u2019s why it\u2019s best to check the foreclosure charges levied by a lender before taking a loan.<\/p>\n\n\n\n

Additional Read:<\/strong> Home Loan Vs Personal Loan? Which One Should You Repay First?<\/a><\/p>\n\n\n\n

Your turn<\/strong><\/h3>\n\n\n\n

In the end, foreclosing your loan entirely depends upon your preferences. If you are looking to save money, make sure you prepay early into your tenure. If you just wish to go debt-free, prepayment, again, is the right option. However, if you\u2019re too late into the tenure or don\u2019t want to hurt your credit score, it\u2019s better to repay it over your decided tenure.<\/p>\n\n\n\n

With Tata Capital\u2019s housing loans, you don\u2019t have to ever think about foreclosing your loan. Why? Because our easy home loan eligibility<\/a>, affordable rates, and excellent customer service make the loan borrowing experience completely seamless and hassle-free. <\/p>\n\n\n\n

Start planning today with our home loan EMI calculator<\/a>.<\/p>\n\n\n\n

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Apply For Home Loan<\/a><\/div>\n<\/div>\n<\/div>\n\n\n\n
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However favourable your home loan interest rates or terms are, paying EMIs will always be a hassle. <\/p>\n

Read More<\/a><\/p>\n","protected":false},"author":1,"featured_media":25928,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[25],"tags":[],"class_list":["post-25926","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan-for-home"],"yoast_head":"\nPrepaying a Home Loan - Good Idea or Bad? - Tata Capital Blog<\/title>\n<meta name=\"description\" content=\"Prepaying a home loan sounds like a good idea but is it actually? When to prepay, how to prepay and whether or not you should prepay your mortgage. 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