When it comes to home loans, it is better to pay the loan off before the planned tenure. It can be hard to allocate funds to pay a home loan sooner than expected but if we do it, a major burden can be reduced and we can plan on next investments. In many countries, people don't go for home loans and purchase a property. They mostly prefer rented houses because they may not be willing to stay in just one place. This has been a practice for many people in India too. They like traveling to many places and renting a property there and staying there.
In India purchasing a property and paying off the loans is a big burden. Many people might as well go for a second and third property based on their needs. There is a saying that "Fools purchase property and wise people live in them". This saying means that those who live in a rented property are the wise people and people taking loans and purchasing a property are not wise enough. It differs from one person to another, from one place to another, and from one family situation to another. It all depends on how we want to live our lives and to plan our investments.
It is always better to close your home loan faster in India. There are many complications in Home loans. People might think that it is wise to get a Home loan and reduce the tax burden but we might end up paying two times or three times the actual cost of the property.
Part payments
The best way to close the loans is definitely by paying extra. Some of the banks in India provide this facility to do part payments. These part payments help us reduce the burden of the loan by letting us pay some decent amount as part payments. Banks like SBI provide us an opportunity to do unlimited part payments and push more money to our loan account. This way the interest we would be paying the bank would reduce. If you are lucky to have taken a loan on SBI, then it is a good opportunity to keep sending money into the loan account whenever we get the chance. They even accept lower denominations.
One of my friends used to say they would send even 500 into the loan account whenever they thought of going out for dinner or something. The first thought that goes to their mind is to complete their loan instead of spending money on entertainment.
Reduce your unnecessary expenses
As said in the above paragraph, we have to be very careful with the expenses that we are making. There is a high possibility that we might incur more expenses than usual when we are actually on a loan. One of the biggest advantages here is that we can easily prevent ourselves from falling into the trap by reminding ourselves that we have a huge loan to complete. This attitude will always make us stay wise and invest our time and money only on productive things and at the same time we will also be able to recover from the loan burden much faster.
Fixed interest rates
Many people demand fixed interest rates. It is believed that a fixed interest rate provides us an opportunity to pay less amount of interest for our loans. When I recently enquired the banks said that it has now become an RBI rule where the banks can only give at variable interest rates. If you are going for a loan, it is better to check your interest rates and if possible try to get a fixed interest rate.
Never take a new loan
We have to always remember that our focus should be on completing the existing loan. We cannot take one more loan without closing the existing loan. I'm not saying that we cannot do it but we shouldn't be doing it. If we take a new loan, it can become an additional burden to us, and we might as well struggle to close both loans. It can sometimes be tempting to take a loan to invest or something or spend on something. It is better to control the emotions focus on the current loan and plan for the next loan only after the current loan is over.
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