Home Loan Repayment

Paying EMIs on time for any of your loans boosts your creditworthiness. To make sure of timely payments, most of the banks schedule the EMI due date close to your salary date to ensure there will be sufficient funds in your account. This is also done to minimize the chances of default. A default EMI payment can charge you penalties from the lenders, and moreover, it affects your credit score negatively. 

Well, this was all about paying EMIs and its timely payment, but are you aware of the benefits of repaying higher home loan EMI’s. 

Home Loan Repayment with Higher EMI

The amount one avails as a Home Loan is generally high, and it can one can run into crores in most of the cases. The maximum repayment tenure offered by the lenders regarding this is usually 30 years. One may get flexibility in terms of selecting the tenure as per one’s convenience. And the tenure you decide decides your EMI.

Like any other loan, Home Loan EMI consists of two components, which is principal and interest. The interest component is higher in the starting phase as compared to the principal component. While towards the latter half tenure period, the principal component is higher than the interest component.

This implies higher will be your EMI, lower will be your interest expenses. And quicker will be the repayment of the principal amount. 

Note: Use the Home Loan EMI Calculator to get a clear & better idea.

Benefits of Repaying Higher Home Loan EMI

1. Saving on the Interest

Savings on interest cost is one of the major benefits of paying a higher EMI towards your Home Loan. The EMI amount has a direct impact on the interest cost of your home loan. 

In short, higher will be the EMI, quicker would be the repayment, and lower would be the total interest cost. You can use a Home Loan EMI Calculator available online to have a clear idea about your total cost, total savings and the estimated EMI which you can afford to pay. 

2. Quicker Repayment of the Loan

When you pay a higher Home Loan EMI, this ensures a quicker repayment of your home loan. Repaying a home loan early not only makes you worry-free but also gives you the confidence of being financially stable.

Repaying a higher home loan may require you to cut down on your lifestyle expenses. But, it is totally worth.

3. Credit Score

This is yet another advantage of expanding your Home Loan EMI. Your credit rating improves on the off chance that you repay your loan before the tenure period. This makes you trustworthy for future borrowings as well. A higher EMI sum mirrors your money related capacities, and by repaying the whole advance sum in a shorter tenor, you show incredible liquidity of assets to the moneylenders. This is profoundly looked for after quality by banks and assumes a critical job while a moneylender is evaluating your financial soundness for any other type of loan that you require.

4. Tax Benefits

Tax benefits on Home Loan repayments are one of the things about which most of the borrowers are concerned. Home loan tax benefits can be availed under Section 80C, Sec 24, and Sec 80EEA under the Income Tax Act. The benefit availed is against the principal component and interest component of your Home Loan EMI separately. 

On interest component one can avail a tax benefit up to ₹ 2 lakh under section 24 and ₹1.5 lakh under section 80C on the principal component.

In many cases, borrowers are unable to maximize the benefits available as they are paying a lower EMI. By opting for a higher EMI amount, a borrower can maximize the tax benefits available.

5. Proper Utilisation of Money

You can increase your Home Loan EMI amount only when you have that much funds. So, if you have a surplus of funds through any source, then the best way to utilize this is by increasing your home loan EMI. This will give you several benefits as mentioned above and another thing is you will be utilizing your funds in the proper place where you will get good returns only. Suppose if you have funds and you invest it in shares or you spent it on your luxury. This is not going to give you the same result as an early home loan repayment will do.

Paying a higher home loan EMI has several benefits, so whenever you find yourself having surplus funds, then consider increasing the EMI of your home loan. Paying a home loan early not only clears your loan but provides you financial freedom and a worry-free life ahead.