Smart EMI hacks: How to pay off a Rs 50 lakh home loan in under 10 years
By Team Asianet Newsable | First Published Sep 3, 2024, 12:55 PM ISTRepaying a Rs 50 lakh home loan within 10 years can save over Rs 20 lakh in interest. This means paying less than half the interest compared to a 20-year tenure.
Owning a home is a dream for many, but it requires significant financial resources. Even a small house can cost lakhs of rupees, leading many to rely on loans from banks and financial institutions. The number of people taking out loans to buy homes and apartments is increasing. However, without proper planning, loan repayments can become burdensome, leading to high-interest payments.
If you repay a loan over an extended period, you may end up paying lakhs of rupees in interest alone. Therefore, it's crucial to have a plan for repaying your home loan, preferably within a shorter timeframe. This approach helps you save a substantial amount on interest. Here's how:
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When you take out a home loan, a longer tenure results in a higher interest burden. Let's assume you've taken a home loan of Rs 50 lakh. Banks typically offer home loans at interest rates below 9%.
If you choose to repay the loan in 10 years, you'll end up paying around Rs 26 lakh in interest. However, if you opt for a 15-year loan tenure, the interest amount increases to Rs 41 lakh, and for 20 years, it shoots up to Rs 58 lakh. Therefore, repaying the loan within a shorter period can lead to significant interest savings.
By repaying a Rs 50 lakh home loan within 10 years, you can save over Rs 20 lakh in interest. This means paying less than half the interest compared to a 20-year tenure.
It's important to note that a shorter loan tenure translates to higher monthly EMIs. By increasing your EMI amount by 5% annually, you can repay the loan within 8 years. Similarly, a 10% annual increase in EMI can help you clear the loan within 10 years.
Increasing your EMI whenever your salary or income rises can significantly reduce the interest burden. Additionally, banks often recommend insurance when you take out a large loan. A lower EMI payment may result in reduced insurance coverage. If you choose insurance from a different provider than the lending bank, you can continue to benefit from the insurance coverage even after repaying the loan.
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