A home loan is a secured loan, which requires the borrower to keep collateral with the lender. The amount of your loan depends on the property that you have a mortgage. Generally, ICICI bank approves up to 70% of the total value of your property as the loan amount. The minimum credit score required to apply for an ICICI Bank Home Loan is 750.
For home buyers, the most convenient source of income is a home loan. When applying for a home loan, you must go through a strict documentation and approval process. Because the loan amount is large, lenders follow a strict procedure, as even the smallest error can result in the application being rejected.
A home loan is an excellent source of monetary support that might assist you in purchasing your dream home. The loan is a long-term commitment, and repaying it is far more difficult than asking for or receiving approval from the lender. Let’s look at some repayment strategies to help you better manage your home loans.
When you decide to take a home loan, the home loan repayment procedure can be financially draining because you need to pay your EMIs on time. However, if you have a firm plan in place, repayment shouldn’t be too difficult. Let’s learn about Home Loan Repayment Strategies
1. Down Payment
The loan amount can be reduced if you are able to pay a larger down payment. This will help to cut the ICICI Bank Home Loan Interest Rate even further, and the Home Loan repayment will be shortened. Ideally, the home loan buyer needs to pay at least 20% of the housing value as down payment.
2. Lower Interest Rates
Many of the customers take a home loan from any first lender at a higher interest rate, while missing some of the best offers in the market. Refinancing can be a wise move because it decreases the interest burden by transferring the outstanding loan amount from the previous lender to a new lender at a reduced rate. This is a simple and practical technique to save money on interest and use it to cover other financial responsibilities.
3. Choose a Short Loan Term
The longer the loan term, the greater the interest rate charged by the lender. If you’re financially secure, opt for a shorter term. This ensures that the Home Loan repayment procedure is shortened and that the interest rate is low. Also, you will get free from the burden of such a large loan earlier if you choose a shorter repayment period.
4. Loan Prepayment
If in future you are entitled to a considerable amount of money, you can choose to pay the complete remaining loan amount to the bank. This is known as prepayment of loan. You can reduce your interest payments by prepaying the loan amount. However, you should confirm this with the bank because a penalty may be charged or they may require you to pay a fee if the interest rate is fixed. Pre-closure charges are not imposed in the case of the floating interest rate.
5. Increase your EMI
If you are financially secure, you can choose to increase the EMI by 5% per year or pay more than one EMI each year. The interest outflow will be significantly reduced. Estimate your financial demands and then determine how much extra EMI you can afford if your salary increases or you receive an annual bonus. Even if it is a nominal amount, it can make a difference in the length of your loan which would eventually help you to repay it faster.
The Bottom Line
Whichever choice you choose from the list above, you must first consider your financial situation. You should not go above and beyond your disposable income in order to pay off your home loan faster as if you skip any of your EMI’s, it will highly impact your credit score. Also, the defaulters do not create a positive image in front of the lenders and you may not get good offers from your bank in future. Therefore, it is necessary to decide and calculate your income, your other expenses, your EMI’s that you can pay without any default and your repayment capacity. All these factors should be taken into consideration before applying for a home loan.