7 hacks for accelerating your home loan payment

Home loans help people purchase their dream homes, but they are usually also one of the biggest financial commitments in one’s life. And if not planned properly and managed wisely, a home loan can lead to a debt trap, which can be difficult to escape.

Bankbazaar lists here some simple hacks for accelerating your home loan payment and getting out of debt fast:

1: Maintain A Good Credit Score

The interest rate of your home loan is linked to your credit score, which can be ensured by timely payment of EMIs and credit card dues. Being a super-prime borrower (having a credit score of 800 plus) helps you get a great interest rate.

2: Refinance To A Lower Rate

Ensuring that your home loan interest rate is close to the best in the market will help you get out of debt faster. A refinance once every few years can keep you aligned to the best rates in the market.

3: Pay 1 Extra EMI Once A Year

Extra EMI payments help you save interest and get out of debt faster. One extra EMI paid at the end of every loan year can shorten your loan tenor. For instance, a 20-year loan can be paid off in about 16 years.

4: Use The 5% Method

Strategic lump-sum pre-payments of your home loan move mountains. Pre-paying just 5% of your loan balance once a year can make your EMIs more effective, and close out a 20-year loan in about 12 years.

5: Race To The Halfway Mark

It takes about 60-70% of your loan tenor to pay only 50% of the loan via only EMIs. Make your journey shorter. Get to the 50% mark faster by pre-paying. This makes the second half easier.

6: Get To EMI Breakeven Fast

It takes about 40-75% of your loan tenor for your EMI principal and interest to equalise. Get there faster using pre-payments. This makes your EMIs more effective and cuts your interest.

7: Hike Your Own EMIs Voluntarily

Voluntary EMI hikes are one of the most powerful ways of getting out of debt fast. Even a minor 5-10% increase in your EMIs once a year can help you accelerate out of debt.