4 Aspects that affect your housing loan prepayment plan

 Making prepayments on housing loan with the surplus is an example of smart financial management. Using a home loan prepayment calculator to evaluate the savings made on interest outgo.

This will help them make lucrative savings and clear the outstanding debts faster, without worrying about the current home loan interest rate. The factors to consider for the same are discussed below.

What are the factors to check for home loan prepayment?

Here are four essential aspects to keep in mind while planning the prepayment of housing loan.

1. Prepay using surplus

Availing a home loan obligates a borrower into a long-term repayment structure. Hence, it is essential to maintain a financial backup. In addition, individuals can use their surplus earnings, like yearly bonus, to clear the outstanding debt. 

2. Check factors like EMI and tenor 

individuals can reduce their subsequent EMIs on a  housing loan. This option helps save more on disposable income, which can be used to repay the fixed liabilities. Choosing a short tenor is again a smart way to reduce the interest outgo on a home loan. However, it can increase the EMIs. 

In this regard, choosing the right lender becomes crucial. Individuals can compare the features and find a lender extending compatible prepayment options. Additionally, they can use a housing loan eligibility calculator to evaluate the loan availability.

3. Opt for a balance transfer

It is always advisable to look for options before making a prepayment. For instance, individuals can opt for refinancing to reduce their repayment burden. This option help make significant savings by transferring the outstanding balance to a lending institution levying nominal interest rate. However, applicants need to surpass home loan eligibility criteria to avail the service.

4. Avoid using emergency funds

Individuals often maintain a habit of depending on emergency savings to make a prepayment. Unfortunately, this practice can create issues during a crisis. Therefore, home loan borrowers should follow a planned approach.

These are the essential factors regarding home loan prepayment charges that borrowers should check. If confusion persists, one can use a home loan prepayment calculator to evaluate the savings made.