- 6 Ways To Effectively Plan The EMIJuly 10, 2018
EMIs have become a recurrent term in a home purchase as a home loan has become the most preferred financing option for owning the dream home. When availing a home loan it is mandatory that the lender should be aware of all the factors involved in calculating the monthly EMI as not to put a burden on his monthly budget.
Here are some methods to follow for planning the EMI for efficiently planning a home purchase
1. Choose a short-term loan
Compared to a long-term loan, a shorter term loan has higher EMIs, but the overall interest paid at the end of the term is profitable. The principal amount in a short-term tenure loan is paid faster which lowers interest rate as the interest is calculated on the outstanding principal amount.
2. Low-interest rates
Choose a low-interest home loan after careful consideration of different interest rates in the market. Refinancing the home loan when the interest rate comes down is also advised.
3. Pay off the principal amount
A recommended move for lowering the burden is to pay off the maximum principal amount so that the interest rates to be paid to the bank will be reduced. Using the savings to pay a part of the principal amount to get the interest as well as the principal amount reduced is also an ideal step.
4. Plan monthly finances
Prior planning of monthly finances according to annual or monthly income is crucial for calculating monthly budget or expenses. This will also help choose the right EMI rate which does not become a burden.
5. Pay higher EMIs
It is wise to pay higher EMI amounts when financially stable to reduce the loan tenure. This will also help to pay off the loan faster with a reduced interest rate.
6. Compare interest rates
Enquire with the bank if the interest rate of the existing home loans can be reduced. If this is not applicable, compare lower interest rates offered by other banks and refinance the loan.
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