Owning a house is an important goal in everyone’s life. With our high standard of living & increasing costs of quality life, it has become challenging to manage our everyday expenses, especially if you have availed long-term credit like a home loan. Regardless of the size of your pocket, the money you earn is hardly ever enough to manage those household expenses. Saving money is yet another dream most of us fail to accomplish. Thus, if your home loan EMI is eating your major proportion of income, here are some better ways to manage your home loan EMI.
However, before knowing about ways to manage EMI, let’s understand about EMI:
What is Home Loan EMI?
A home loan EMI or Equated Monthly Installment is the definite amount that you need to pay every month to your lender. It consists of both the interest payments & principal amount of the home loan. In the initial years, the interest component of a home loan EMI is significantly higher than the principal, which however reverses as the tenure of your loan progresses.
Factors that affect your Home Loan EMI
Loan amount – Higher the loan amount, higher is Home Loan EMI. It is thus essential that you apply for a home loan that you can easily repay as per your borrowing capacity.
Rate of interest – Lower the home loan interest rate, lower the EMI. Before availing a home loan, you must compare home loan rates of multiple lending institutions.
Loan Tenure – The tenure of home loan also affects EMI, Longer the tenure, lower is your home loan EMI.
Tips for managing your Home Loan EMI
1. Getting an estimate of your Home Loan EMI: Before availing a home loan, it is essential that you are well aware of your income and expenses. If you are unable to repay your EMI based on your income level, you are bound to get trapped in debt. Using an online home loan EMI calculator can be a solution to your problem and can help you to calculate the EMI that you can easily manage with your current obligations & income level. You can calculate home loan EMI for different tenures to determine the best home loan with the lowest EMI.
2. Choosing maximum home loan tenure: Well, it is an undeniable fact that no one wants an extra burden of interest payments on their heads but choosing the home loan with maximum tenure should be your choice if you are not entirely sure of your debt obligations in the future. It is because as longer the tenure, lower will be your home loan EMI.
3. Paying maximum contribution: At the time of availing a home loan, you must contribute the maximum amount out of your pockets. This would help to lower the amount of EMI. Also, it is difficult to get an estimate of your expenses & income in the future.
4. Home Loan Prepayment: Home loan prepayment is yet another measure to reduce the burden of your home loan EMI. Have surplus funds or received a bonus, you must prepay your EMI. You can consider prepaying a portion of your loan or your entire loan.