A house is a big investment in itself and it also gives you a feeling of contentment at the same time. Buying a home loan with Instant Loans approval with BC Loans is always a good idea as it puts a halt to heavy rent payment and a sense of a place which you can call your very own. Hence, it is very important to choose the right type of loan with an appropriate tenure and competitive interest rate. Here are some smart ways to pre-pay your home loan like a pro.
- Don’t fall in the trap of pre-EMI plans.
Banking companies and the builders come up with a lot of pre-EMI plans among their particular projects. In this plan, you will only have to pay the interest as long as the project is still under construction, and once you shift into the premises, after its completion, the regular EMIs, interest + principal repayment will commence. You should only opt for the pre-EMI plan if you have financial issues. If you are paying for your EMIs regularly, it will consequently reduce the principal amount which is advantageous in the long run.
- Make the best out of the increased disposable income
It is highly recommended to maintain your income-to-debt ratio if just in case your disposable income increases. It means that you should also increase your EMI in the same proportion in order to pay off your debt early. Any reduction in EMI will only impact the interest while keeping the principal amount intact. Thus, if the rates are decreasing, reduce the tenure instead of the EMIs, as it will also reduce the principal amount.
- Channel your windfall gains
In order to pay off your debts early, it is advisable to channel your windfall gains and one-time payment towards the loan prepayment. One-time payments include yearly bonuses, incentives etc. The source of windfall gains may also be winning a lottery or unforeseen profits. These kinds of funds assist you in making partial bulk payment hence reducing the debt by significant amounts.
- Save to achieve pre-payment targets
Make a monthly saving in order to make some bulk pre-payment of your home loan. For instance, if you plan to repay $1,000 next year, start saving $80 to $90 per month. Another great option for such savings in the recurring deposit. If you plan strategically, it will help you mobilize your monthly savings towards the annual repayment of the home loan which consequently reduces the tenure and the EMI payments as well.