Prepaying your home loan is the biggest relief as it rids you off a major debt but it comes with its own complexities too. There is a lot of paper work that needs to be handled and you also have to check if there are any hidden charges for repaying the loan in advance. However, before the process of prepaying, prepare yourself a list of dos and don’ts that need to be taken care of:
Choose your loan wisely
This is when you select the loan but while availing the loan make sure you loan allows you an easy prepayment process. It is advisable that you check with various lenders and choose a scheme that is best suitable for a situation like this.
Know your budget
Depending on your requirement, choose a budget that suits your budget. If you are building a house from scratch, it will need more money buying an apartment is cheaper. Do not go for a loan that stretches your budget and eventually becomes a burden. Take only an amount that you know you can repay.
Pay steady EMIs
Always pay your EMIs on time so that it works to your advantage when you decide to prepay. When you tell your lender about prepayment, they either reduce the home loan EMI amount or reduce the tenure of the loan. The final goal is to maintain a healthy financial record, so, choose an EMI you can easily pay.
Prepay as early as you can
If you know you will prepay and are sure you’re going to do it at some point, then prepare yourself accordingly. Prepayment should be done in the early stages of the loan then only it is beneficial. Prepaying towards the end of the loan tenure helps save little to no money. So, ensure you prepay after analyzing every situation.
Carry all relevant documents along
Once you have decided to prepay, carry all the relevant documents along. Apart from making your loan prepayment, you also need to pay simple interest for the month towards which the principal is being prepaid.
Calculate the benefits beforehand
Prepayment may not be suitable for every situation. Your situation may or may not demand you to do it. So, evaluate your expenses and then only go for the prepayment.
Don’t overlook the tax benefits of the loan
Home loans fetch you good tax rebates. Closing a loan also deprives you of the tax benefits.
Don’t prepay the entire loan amount
Many people rush to close the entire amount. Instead of this, you can prepay some amount and use the rest of the amount in investment, that will fetch you more money.
Don’t forget to get an acknowledgment for your payment
Get an acknowledgement from the lender stating the amount that you have prepaid. The acknowledgement should also mention the principal outstanding amount of the loan.
Don’t forget to collect unused cheques from the bank
As a precautionary measure, collect all the pre-dated cheques given to the lender. This avoid any room for the misuse of those cheques.
Updation of Prepayment Details in CIBIL Database
- Since your creditworthiness depends on the outstanding balance, it is essential that you update the home loan prepayment details in your CIBIL database. This is because prepayment of your home loan will reduce the outstanding balance, which in turn will increase your creditworthiness. It will help you in improving your CIBIL score to a certain extent. Thus, one of the major home loan prepayment advantages is that it can help you in boosting your CIBIL score.
- Therefore, once you are done with making prepayment of your home loan, it is essential that you request the lender to update your Prepayment details in CIBIL Database. Thus, your current outstanding balance against the home loan account in your CIBIL report will be updated and revised principal outstanding.
- Usually the CIBIL database is updated within 45-60 days from the date of payment. Therefore, you must pull out your CIBIL report after 60 days check it thoroughly to ensure that the changes are made.
- Before going ahead with home loan prepayment, make sure that you are well aware of the home loan prepayment rules. This will help you avoid any inconvenience in the later stage.
Now that you have learnt all about the dos and don’ts of Home Loan Prepayment, go get yourself that home loan you have been eyeing. Apply for Bajaj Finserv Home Loan at Finserv MARKETS and avail a host of benefits!
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