Should You Increase EMI or Tenure on Home Loans?
Investing in a home can be a very fulfilling experience for some, especially for first-time investors. And if you have borrowed money for your house from a bank, the thought of how to manage a Home Loan must be occupying your mind.
Talking about Home Loans, embracing ways to save more on interest payments is quite an essential and smart financial move. You can save those extra bucks just by playing with your EMI and loan tenure. Borrowers are usually confused about whether to reduce tenure or EMI.
What is EMI?
Equated monthly instalment or EMI is a fixed amount paid by a borrower to his/her lender each month at a specific date. EMI consists of both, a part of the total interest amount and a part of the principal amount. The borrower pays the EMI over a specific time period with the aim of retiring the loan.
EMIs make personal budgeting processes trouble-free for the borrowers, as it allows them to know the exact amount they need to pay every month for their loan. Your monthly instalment can be determined with the help of a Home Loan EMI calculator, which is easily available on banking websites and financial blogs.
While applying for a loan, approach banks that offer the lowest Home Loan interest rates and additional perks. Financiers like Bajaj Finserv offer Home Loans with easy approval and incentives like nil foreclosure charges.
What is Home Loan Tenure?
Loan tenure can be referred as the length of time between furnishing the loan amount and the last EMI payment by the borrower. Simply put, it refers to the time taken by the borrower to repay the loan including the interest. The primary factors in determining the length of the tenure are income and age of the borrower, and remaining length of the borrower’s career.
Increase EMI or Tenure?
Are you confused whether to increase EMI or loan tenure to save on your interest payments? Let’s help you out.
When Home Loan interest rates come down, ideal borrowers reduce the loan EMI, since it saves on their monthly payments to the bank. But this practice is not so ideal and it is advised to increase the EMI instead. This will reduce your loan tenure, ultimately reducing the overall interest paid on the loan.
If your bank brings down the interest rates, continue with your previous EMI instead of the new reduced one. This will retire the loan in less time than initially planned, allowing you to save more on your total interest payments.
If you are applying for a Home Loan, then consider factors like ease of approval and duration of grace period before settling on one. Bajaj Finserv provides 5-minute approval facility for online applications. With Bajaj Finserv you can easily apply online for Home Loan at low interest rate.