It’s no secret that a housing loan is a serious, long-term financial responsibility. Considering the quantum of funding, every borrowing decision must be properly planned. Failing to do so could end up costing you significantly in the long run, affecting your financial health. To ensure that you take the right steps along the way, here are five smart ways to manage your housing loan effectively.
Improve your housing loan eligibility before you apply
Managing your home loan effectively is not only applicable when you’ve availed the sanction; it is something you can and should actively undertake as early as during the application process. The reason for this is that your housing loan eligibility largely dictates the loan terms offered to you. These include the sanction loan amount, tenor options, fees, and the housing loan interest rate. The last factor, the interest rate, is particularly important because it dictates your total interest outgo, otherwise known as the cost of the loan.
Naturally, it is in your best interest to secure the best possible rate and this is only possible if you have a stellar financial profile. Before you apply, ensure that your credit profile is in the best shape it can be and your credit history does not reflect any issues. Moreover, try to increase your CIBIL score, as lenders usually offer better loan terms to applicants with an excellent score. Aim to maintain a CIBIL score of at least 750 while applying.
You also want to gather all the required property documents beforehand and pick a developer or builder from the lender’s approved list, so as to stand a good chance at securing a loan at favourable terms. Lastly, keep in mind that your job profile and your income sources all factor into your housing loan eligibility.
Make a sizable down payment
A housing loan doesn’t cover the entire cost of the home. Lenders only offer to fund up to a certain percentage, and the remainder must be borne by you. While you can make the minimum down payment, a better way to go about it is to make a larger down payment, more than just the minimum required by the lender. By doing so, you reduce the principal amount on the loan and ultimately, decrease the total interest payable.
Use the housing loan calculator to plan your loan
A home loan calculator is a tool you should be familiar with if you want to manage your loan effectively. It is freely accessible on most lenders’ websites and fairly simple to use. It provides you with vital information about your loan, specifically your EMI amount, total interest payable, and the total amount payable. With this tool, you can plan your housing loan by inputting values into the data fields and adjusting them until you finalise acceptable values for the EMIs payable and the total interest outgo.
Budget wisely to allow for higher EMIs
The housing loan calculator can also be used to help you realign your monthly budget to match your new obligations. A good way to manage your housing loan cost-effectively is to assess your monthly expenditure, do away with unnecessary luxuries, and free up funds for loan repayment. Paying higher EMIs results in a lower interest outgo over the course of repayment.
Save any excess earnings for pre-payments
Over the course of time, it is quite normal to come into some windfall gains. Be it a maturing investment or a bonus payment from your job, these excess earnings should be used wisely. One way is to ensure they’re used to make pre-payments in your housing loan. This is a great way to reduce the principal amount and by making such payments regularly, you save a lot on interest and become debt-free faster.
Employing any of these smart measures to manage your housing loan is sure to help you make the most of the experience. These also help you prioritise the obligation and steer clear of common pitfalls that affect many other borrowers. Many of these tips also focus on reducing your total interest outgo, which is usually a sizable amount with this credit instrument. If affordability is a priority, as it is for many of us, you can consider opting for the Bajaj Housing Finance Limited Home Loan.
With the Home Loan from Bajaj Housing Finance, you gain access to a loan amount at a competitive and attractive interest rate. For added affordability, you can opt for a flexible tenor that gives you the freedom to tailor repayment as per your financial capabilities, allowing you to enjoy optimal EMI outgo. You also benefit from quick loan processing. To get started, apply online for a hassle-free application.
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