Editorial staff
Careful planning for your home loan EMI is essential for a smooth homeownership experience. Knowing how much you can comfortably spend each month allows you to avoid stress and protect your long-term financial goals. Let's consider the steps and tips to help you make an affordable payment plan:
Understanding the Structure of Home Loan EMI
Your EMI is comprised of two parts:
- Principal: The actual amount of money you borrowed in the beginning.
- Interest: The cost of borrowing that your lender charges.
That said, compare various EMI options, as even a small variance in the interest rate will lead to a significant difference in the EMI you pay.
How to Plan Manageable and Affordable Payments?
The EMI is not just a number; it will affect how much money will be left for your other expenses, savings, future investment, etc. A well-organized EMI repayment enables you to spend well without depleting your financial resources.
1. Calculate Before Committing
This is the first thing you do before applying or agreeing to the loan terms. Take the help of an EMI calculator and enter the loan amount, tenure, and interest in it. It will estimate an EMI amount that will show you what your monthly outgo may look like, helping you choose an EMI plan that fits your income profile and lifestyle. Before entering into a loan agreement, calculate and compare to prevent higher payments.
2. Keep EMIs Within a Manageable Ratio
Financial advisors recommend EMIs to be below 35-40% of your income. So, if you earn ₹80,000 per month, then your payment must be ₹28,000 - ₹32,000. This way, you will have enough money left over for other reasonable expenses and savings. Remember, this is for all your repayments and not just the home loan EMI.
3. Choose the Right Tenure
The tenure of the loan affects affordability. Normally, this is how it works:
- Long tenure: Low EMIs, but higher total interest paid.
- Short tenure: Higher EMIs, but lower total interest paid.
Suppose you take a loan of ₹30 lakhs at an interest rate of 8.5% for 15 years. Your EMI will be approximately ₹29,600. However, if the tenure is 20 years, your EMI will be ₹26,000, but at the cost of higher total interest. So, compare your options to select the apt and best offer.
4. Prepay (Fully or Partially)
If you get additional money like a bonus or hike, prepaying is a good way to reduce your outstanding principal and future EMIs or tenure. Such a decrease in total repayment will help save on interest.
5. Keep EMIs in Check
Remember, taking multiple loans simultaneously can add pressure on your finances. So, try and pay off your small debt first before taking another loan. This method helps maintain a good credit score too.
6. Consider Balance Transfer
Another way to reduce your EMI would be to refinance at a lower rate if the interest rate drops or another lender offers better terms for the loan. Doing this will help you adjust your repayment to suit your needs and even save on interest.
Planning home loan EMIs is about striking a balance between today's comfort with tomorrow's security. To do so, calculate the EMI beforehand, ensure it is within a comfortable range, choose the best tenure, and prepay. Choosing trusted financial institutions like PNB Housing Finance to ensure that your borrowing and repayment journey is seamless and stress-free.
Editorial staff
