5 Things To Consider Before Prepaying Your Home Loan

Prepayment is paying off the entire amount or a substantial portion of a Home Loan before its due date.

What is Prepayment of a Home Loan?

Prepayment is helpful as it saves considerable money and clears off debt quickly. Although you must consider a few points before making prepayments:

Is Prepayment a Good Option?

#1 Do Not Drain Your Emergency Funds

Set aside your savings for unforeseen situations. If you prepay by draining your savings, you might need another loan in case of an emergency.

#2 You Might Lose Tax Benefits

The Income Tax Act has provisions for tax rebates on principal and interest payments, which may be affected by prepayment. Consult your tax advisor before prepaying.

#3 Choose Wisely: Reduce the EMI or Tenure

If you reduce the tenure, you increase the EMI and vice versa. Weigh both situations according to your salary and life goals, and then decide.

#4 Ideal Time for Part-prepayment: Initial period

The interest component is high in the early loan stages. Prepaying at this time will save you on interest costs.

#5 Check the Prepayment Penalty

In case you're preparing to close your Home Loan, check for the preclosure charges levied by your financial institution. PNB Housing levies no prepayment penalty for individual applicants who pay from their own sources.

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