The Advantages Of The Home Loan Prepayment

Home loan prepayments have always seen with a dual vision. It does seem more expensive to repay your own loan with the prepayment option. However, it is a profitable choice to prepay your housing loan. When you consider the home loans in India, each package will have different repayment and prepayment facilities. So the generalizations are useless. However, prepayment is a beneficial choice, if you are in a position to take the advantage of it. Housing finance companies do not want to encourage prepayments. That’s obvious. But, one thing is certain. You can calculate your house loan expenses and choose the path of prepayment as more profitable one.

Lesser interest:

The interest rate of the home loans remains the same. But, as you choose to make a prepayments on the home loans in India, you automatically reduce the home loan tenure. Thus, you can complete the home loan repayment sooner. This means that the total amount of interest paid to the housing finance organization is much lower compared to the normal repayment. This is a bit generic and you need to make the home loan calculations to identify if it is a profitable choice for you or not, but, in 90% of the cases, it is more economical to prepay the home loan.

More savings than prepayment charges:

The common defence that borrowers use to delay prepayments is the housing loan prepayment charges. It can be true for select house loans with fixed interest rates. But, for quite a few fixed interest rate loans and all floating rate loans, it is inapplicable. You will save more even after deducting the prepayment charges. If you opt for home loans with floating interest rates, there are no prepayment charges. So, you will, most assuredly, save funds.

Smarter credit profile:

Are you planning to take any kind of loan in future? Most couples take a housing loan in their youth. They may need to take a personal loan for emergency purposes, or an education loan for their children. Therefore, it may make sense to complete your commitment to the housing finance companies or banks sooner and make your profile attractive for potential lenders, who you may need for gold loan, loan against property, etc. Your chances of getting the loan against the same property and other loans are much higher if you have completed your repayments on time. The prepayments can speed up this process of repayments indeed. It will add a considerable value to your credit profile and lower the applicable interest rates if you are perceived as a worthy applicant for any loans in the future.

So, make the prepayments and enjoy a loan-free home.