home loans


Home loans are one of the most significant debts you may acquire in your life. Depending on the size, location, and type of house you want to buy, you may apply for a home loan that amounts a few lakhs or a few crores. Typically, the lenders in India sanction home loans for a maximum of 30 years, which means you must repay the EMI for 30 years.

However, the longer repayment tenure may have a significant impact on your finances. Hence, experts recommend it is better to pay off the loan earlier than the actual period. And one of the best ways to do so is to repay higher EMIs.

Benefits of paying higher home loan EMIs

One of the most significant benefits of paying a higher EMI loan is that you can pay off the loan faster than the actual tenure. This will help you close the loan account faster and be debt-free. Paying off the loan earlier not only helps you get rid of stress, but also allows you to focus on your other financial goals.

While you carry the burden of repaying the home loan, you may have compromised on travel, or luxuries, but if you increase the EMI marginally every month, it can have a significant impact on your finances in the long run.

When you pay the home loan EMIs, you repay the principal amount and the interest. And the longer the home loan tenure, the higher is the interest pay out. If you opt for paying a higher EMI, you can save a significant amount on the interest outgo. You can check the difference in the total repayment amount by using the EMI calculator for home loanĀ by adjusting the loan tenure. A higher EMI would help you repay the loan faster and save on the interest repayment.

Many experts worldwide have corroborated that paying a higher EMI for home loans and closing the loan before the actual repayment term helps in enhancing the credit score. When you pay a higher EMI, it reflects your higher repayment capacity and creditworthiness. If you want to avail of another loan in the future, your past repayment history and high credit score can help you get the loan approved faster. Also, the lender may offer you the loan at a lower interest rate.

It is a known fact that the interest and principal amount you repay for home loan are eligible for tax deduction under Section 24(B) and Section 80C of the Indian Income Tax Act. You can get a tax benefit of up to Rs. 2 lakhs in a financial year on the interest repayment and Rs. 1.5 lakhs on repaying the principal amount.

However, most home loan borrowers fail to utilise the maximum tax benefit by paying a lower EMI. So, when you pay a higher EMI, you can take maximum advantage of the tax benefits and reduce your annual tax liability.

Final Word

Repaying a higher EMI may not be easy, especially if you don’t have a fixed income every month. However, as your income increases over a period, you can create space for increasing the home loan EMI payment without compromising on your other regular expenses.

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