Whether you are buying a new home to live there with your family or are doing it as an investment, buying a home requires extensive planning and saving. Proper planning ensures it doesn't interfere with the rest of your expenses. However, there are times when you realise that your current salary or savings are not enough to help you fund your dream of owning a home. So, in these situations, taking out a home loan is the wisest course of action, provided you have a continuous source of income to pay for the required EMIs.
Taking out a loan, however, also requires making EMI (Equated Monthly Installments) payments each month without default. Managing the 25 lakh home loan EMI, 30 lakh home loan EMI or any amount, and making on-time repayments are more crucial than choosing a home loan. Skipping an EMI is a risky move because it might result in fines and negatively impact your credit report. If the EMI amount is on the higher end, such as 30 lakh home loan EMI
more than you could afford, it might become a burden on you and starts to take away the joy of living in a new home. Continue to read to know how to manage your EMIs effectively:
Make a budget and stick with it: The first step to ensure you never default on a home loan is to create and follow a strict budget. First, analyse your current expenses and calculate how much you need to keep aside for essentials. Your bank would advise you to allocate roughly 40% of your monthly income to 30 lakh home loan EMI payments if you are currently debt-free. Consider cutting back on some of your normal but unnecessary expenses to accomplish this. If you are the sole breadwinner of your family, you will have a lot of expenses to cater to, such as those for your children's school, medical care, personal spending, etc. Factor these expenses and potential last-minute expenses that could have an impact on your budget. In the quest to pay off the loan earlier, don't commit yourself to a high EMI only to find yourself struggling with the burden later.
Use a lump sum payment for EMI payments: If you currently have received a lump sum amount, such as an amount from matured fixed deposit or a bonus, you should ideally put it towards prepaying your loan. Putting the sizeable amount helps to bring down the total loan amount of 25 lakh home loan EMI. As per the experts, the best time to pay the lump sum amount is during the initial years because, during that time, the principal is at an all-time high. It is imperative to check for any prepayment charges with the lender before doing so.
Never Default in Making Your Loan Payment: Such defaulters are marked by lenders, who then report this information to credit bureaus. So, avoiding falling into such a questionable area is one of the wise strategies for managing your loan EMI. Speak with your lender and ask for an EMI reduction on 25 lakh home loan EMI if your finances have lately suffered due to lay-off or for something else. Lenders occasionally permit their customers to postpone making EMI payments for a shorter length of time.
Prioritise and plan: Making your repayment a top priority is another crucial piece of advice that many experts seem to give because doing so builds your credibility with the bank in question. To avoid a default, it's important to plan the payment close to your due date. As previously said, never skip a 25 lakh home loan EMI, as doing so could damage your image with the bank, and you lose out on the future scope of renegotiating with the bank related to interest rates.
Make an EMI-specific fund: Create a fund specifically for your 30 lakh home loan EMIs and save as much as you can and put it all there. Additionally, you can draw money from a few of your accounts where you were putting money for investment, if you have any. However, be careful to only withdraw money from accounts that aren't paying you enough interest. Additionally, you can all together put your money in a short-term investment plan before applying for a loan. Plan it carefully to ensure that you receive the maturity sum on schedule. The money can be used to accumulate cash that can be used to pay your 30 lakh home loan EMI.
Cutting costs might not be sufficient. Make an effort to increase your income: If your home loan 25 lakh home loan EMI are high and your income is stable, cutting corners, however, might not be sufficient, especially when your family's financial obligations grow over time. As a result, you should always look for ways to increase your source of income so that you have more room to cover all of your bills and reach your savings and investment goals. What you can do is upskilling to obtain a profitable job or better-paying promotion, online freelancing or coaching, etc. Share financial obligations with family members who are employed.
Refinance your home loan: Refinancing is the process of switching out an existing loan for a new one with better or favourable terms offered by the new lender. To reduce EMIs and loan terms, people frequently refinance their loans. However, there is a processing charge associated with this switch. Calculate whether the money you will save in the long run will be greater than the extra expenses you will have to pay now.
Conclusion
Unlike other types of loans, home loans are serious financial commitments and should be taken up only when you are confident that you can manage them alongside other expenses. By keeping the tips mentioned above in mind, you will easily be able to manage your EMIs well and enjoy life within your means. Maintaining a high credit score and repaying the amount on time will ensure if you ever need to apply for a loan in future, there are higher chances of your loan application getting approved. Additionally, watch out that the loan does not lead your monthly spending to spiral out of control. To handle unforeseen needs, try to have an emergency fund before applying for a home loan.
