Want to Prepay your Home Loan? Here’s How You Can Do it

Experts suggest that you should opt for a longer tenure on your home loan if you wish to pay a lower EMI. It eliminates the unnecessary burden on your daily expenses and you can comfortably repay the loan over a number of years. Moreover, you can close the loan at any time by prepaying the outstanding balance.

So, if you have decided to prepay the loan, congratulations, for it is a great decision. Prepayment would help you to close your loan faster and save money. But do you know how to do it? If not, here are a few ways to help you with the process.

  • Use partial prepayment facility

If your income has increased significantly or you have been able to save a large amount of money, you can opt for full prepayment of your loan and save on the interest outgo. However, partial prepayment also another means to close your loan faster. You can prepay your home loan gradually as and when you can spare extra money.

  • Use investment returns to prepay

Investments are a good way to generate savings when you are servicing a debt. Instruments like mutual funds and bonds can help you earn good returns over the long term if you invest judicially. You can use the returns from these investments to prepay your loan. Even if you invest a small amount of Rs 5000 per month for ten years, you can save a considerable amount for prepayment.

  • Transfer your loan

You pay a significant amount of money towards the interest outgo while repaying your loan. Therefore, if you are stuck with an expensive loan deal, you can transfer your loan for a lower rate of interest. Also called refinancing, you can switch your lender and avail a home loan that has lower interest rates and better terms.

  • Go for loan restructuring

You can ask your lender to restructure your home loan. It can be done by reducing the tenure and increasing the home loan EMI. Else, you can gradually pay more than the stipulated EMI every month after intimating the lender. This will reduce your total repayment amount and help you save on interest money too. Similarly, when your tenure is shortened, your EMI would automatically increase, helping you prepay the loan before the tenure.


  • Use your bonus and savings

You can use your savings and monetary gifts to prepay the loan. Even a small amount of savings done every month can be useful when you wish to prepay. You can also use an annual bonus, salary hike or monetary gifts received in festivals etc., for prepaying the loan.

While you decide to prepay, it is important to consider the costs associated with it. Home loan prepayment rules state that prepayment charges or penalties cannot be levied on borrowers for taking a floating rate home loan. Whereas, if you have taken a fixed rate home loan, lenders can levy a foreclosure charge for a prepayment of home loan. Therefore, you must weigh the cost and savings of prepayment and then proceed with prepaying your home loan.

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