Which is better increasing EMI or part payment?

For home loans, a higher EMI or prepayment will cut interest outgo, tenure. And if interest rates are falling, even better. Increase EMI if you can. Higher EMIs not only help you get rid of a liability faster but also save big on interest outflow.

Should I increase EMI or prepayment?

However, most borrowers prefer to get their house debt-free as soon as possible. Partial prepayment is a good way to bring down the loan outstanding sequentially. When interest rate comes down and EMI remains unchanged then the interest part decreases and principal part of EMI increases.

Can I pay more than EMI for home loan?

The lesser the principal amount (owing to faster repayment), the lesser the interest amount to be repaid. If you can, then pay more than the regular EMI. You can also pay one more EMI (than the usual number of EMIs) every year. This is an effective trick to reduce your loan tenure, and in turn the interest cost.

Is it good to increase home loan EMI?

You can also pay one more EMI (than the usual number of EMIs) every year. This is an effective trick to reduce your loan tenure, and in turn the interest cost. Increasing your EMI amount by 5\% every year is definitely a smart choice to reduce your interest repayment burden.

How to reduce home loan EMI’s?

Paying home loan EMI’s month-after-month is a burden. How to reduce home loan EMI? By making loan ‘ prepayment ‘. What is prepayment? It is an extra payment made to ones home loan account in addition to the EMI.

Why do we have to pay EMI at the end of tenure?

Because the borrower will continue to pay the same EMI till the end of tenure. When the tenure ends (in 230th month instead of 240th), it is only then the benefit of the prepayment will be realised. Read about smart ways to become loan free.

Should you prepay your home loan or invest in mutual funds?

When we buy a home through home loan, we take into account our current financial situation and accordingly decide how much we can pay as the EMI amount. But over time as our income increases, the dilemma – to prepay your home loan or invest in a mutual fund – often crosses our mind.

Is EMI reduction by default a good idea?

As a result, banks reduces the tenure by default. There is no doubt that prepayment amount used for ‘tenure reduction’ is more profitable. But this doesn’t make EMI reduction obsolete. EMI reduction is also as effective.