WHY REPAY QUICKER?
There are three advantages of repaying your loan sooner.
First, you are freed from the uncertainties of fluctuating interest rates. Once you are free from debt, you can use the surplus towards other investments to meet other financial goals.
Secondly, the faster you repay, the more time you have to meet other financial commitments like saving for children’s education or building a retirement corpus.
Finally, repaying loan faster saves you money in the form of interest payments.
LIQUIDATE LOW-RETURNS ASSETS
You can liquidate other assets or savings that are yielding very low returns and consider repaying your home loan debt. Banks charge a penalty called prepayment penalty, usually two percent of the loan amount outstanding. However, most banks allow partial part-payment within a prescribed limit without the burden of penalty.
The lender charges a penalty, if you take a loan from another bank to prepay an existing loan. This acts as a deterrent to borrowers who contemplate a switch to another lender offering a lower rate of interest. Most banks will be willing to waive the penalty if the repayment is made with the borrower’s own money. Read the home loan agreement carefully to know the applicable charges and penalties