Home Loan Calculator: Here’s how you can save Rs 35.11 lakh and 5 years and 8 months on a loan of Rs 70 lakh
People take different types of loans such as gold loans, vehicle loans, loan against property, loan against securities and etc. and some even tame take home loans to build their dream home. However, the borrowers have to repay a higher interest amount than the principal when take the home loan. The interest gets higher as the loan duration gets longer and when the home loan is for 30 year, it can be more than twice the principal.
By hook or by crook, the borrowers have to pay the monthly installment/ Equated Monthly Installment (EMI) on time if not they will be fined and even have to pay the bounce charges if delay to pay the EMI as per their scheduled date. However, as per a report of the www.zeebiz.com, there are different ways through which the borrowers can decrease the interest amount and even cut down on loan tenure.
These tips can help you to reduce interest amount significantly:
- Make a large down payment,
- Pay an additional EMI every year,
- Make a prepayment(s),
Tips top to reduce loan tenure:
- The lender gives two options to the borrower when they latter opt for the prepayment option. The two options are 1) they can reduce their EMI amount, or 2) they can keep the EMI amount the same and reduce tenure.
- As per the rules of the banks, the interest will decrease if the borrowers reduce the EMI amount but the loan tenure will remain the same. However, both the interest amount and the loan tenure will reduce if they want to keep the EMI same.
How and when to make the prepayment:
- Almost every bank has a lock-in period for prepayment, mostly for three years. Following the completion of lock-in period, the borrower can repay their loan amount either through a one-time prepayment or through monthly installments.
- There are high chances that the borrowers can save more money as soon as they make the prepayment after the lock-in period.
What can be prepayment amount?
- There is no any fix amount for the prepayment. It can be the maximum allowed limit and when the prepayment is higher, the saving of interest will be more.
Now have a look at the calculations for Rs 70 lakh home loan:
- The home loan of Rs 70 lakh is taken as an example with an interest rate of 9.5 per cent for 25 years.
EMI for the Rs 70 lakh home loan will be:
- Estimated EMI will be Rs 61,159.
- Estimated interest will be Rs 1,13,47,630.
- Estimated repayment amount will be Rs 1,83,47,630.
Prepayment amount for the Rs 70 lakh home loan:
- The prepayment amount for the Rs 70 lakh home loan will be Rs 7 lakh (10 per cent of the principal amount).
When the borrower can make the prepayment of Rs 7 lakh?
- The borrower can make the prepayment of Rs 7 lakh after completing 3 years from starting the home loan. However, if the borrower opts for reduced EMI, the estimated EMI will be reduced by Rs 6,338, from estimated Rs 61,159 to estimated Rs 54,820.
How much amount the borrower can save?
- A borrower can save Rs up to Rs 9,66,994.
When the borrower opts for same EMI:
- If the borrower can repay the loan in 232 months (in less than 68 months, or 5 years and 8 months, than the original duration) if opt for the same EMI as before making the prepayment.
How much money the borrower can save?
- The borrower are expected to save an estimated interest of Rs 35,10,091.
(Disclaimer: This is not financial advice. Do your own due diligence or consult an advisor for financial planning.)
Also Read: Cabinet Approves Vidyalaxmi Scheme For Students To Avail Easy Loans For Higher Education
(Source: www.zeebiz.com)