11/11/2014

Home loan: prepayment helps - Hindustan Times

hindustantimes|livemint|livehindustan|more

Search

delhi[min12c/max29c]|cityweather

Tue,11Nov2014

Advertisement

india world cities comment entertainment life&style sports business tech autos multimedia epaper sellonOLX shopping coupons jobs matrimonial

homebusinessnewsutilitybytes

Home loan: prepayment helps

BindishaSarang,HindustanTimesMay25,2012
FirstPublished:20:59IST(25/5/2012)|LastUpdated:01:18IST(26/5/2012)

EMAIL
PRINT

FONTSIZE

SUBSCRIBEBREAKINGNEWSALERT

A|A+|A

Enter email

SUBMIT
COMMENTS

Ahomeloanisusuallythebiggestdebtthatapersontakesonduringalifetime.Givenalongtenorand
highamountofloan,thetotalinterestyoupaytothelenderisalmostasbig,ifnotbigger,astheloan
amountitself.Forinstance,youpayatotalinterestofRs
65.8lakhonaloanofRs
.
50lakhtakenoveratenor
.
of10yearswithaninterestrateof10%perannum.
Ifyouhadnevercalculatedyourthetotalinterestyoupay
andthefigurecomesasashockforyou,heresawayto
lessenthepainifnotremoveitcompletely:part
prepayment.
Dontstopreadingfurtherifyouthinkyoudonthavea
lumpsumtopayoffyourloanorenoughsurplusto
increaseyourequatedmonthlyinstallment(EMI)
substantially.Wearenotsuggestingeitherofthetwo
ways.Numbersweranshowedthatthatevenpart
prepaymentwithanamountaslowasRs
1,000canhelp
.
yousaveasubstantialamountinthelongrun.Besides,it
alsohelpsyoureducethetenureofthehomeloan.

Advertisement

morefromutilitybytes
UTIMFlaunchesUTIMobile
UTIMutualFund,alongwithitsmobilesolutions
partner,mCheck,todayannouncedthelaunchof'UTI
Mobile',whichwouldenableaninvestortoinitiate
paymentinstructionsforinvestinginthefundschemes
fromamobilephone.
Whatis3G?
TheYearOfTheMegaDataBreach

Advertisement

Howdosmallsavingsmakealargedifference?
Whenyou
chooseto
prepaythe
loan,evenif
itsasmaller
amount,you
actually
attackthe
rootofthe
problem.
Everytime
youmakea
part
prepayment
towardsyour
loan,the
amountgoestowardsrepayingtheprincipalamountoftheloan,saidAdhilShetty,CEO,Bankbazaar.com,
aloanportal.Astheprincipalamountyouowereduces,sodoestheinterestamount.

MerepaasMachai
SonytounveilnewPS3gametitleintheaters

markets

Soifyouhaveevenasmallsurplus,youshouldrepaytheprincipalpartofthehomeloan.Thetruthisthat
noteveryonecanaffordtopartpayanentireEMIamountasanadditionalpartprepayment.However,even
ifyouareabletosetasideafewthousandrupeeseverymonth,itwouldworkwellforyou.Herearesome
numberstoshowthat.AssumeyouhavealoanofRs
50lakhforatenureof20yearsat10%perannum
.
interestrate.Wetookfivescenarios,whereinyoucouldpayRs
1,000,Rs
.
2,000,Rs
.
3,000,Rs
.
4,000orRs
.
5000
.
everymonthasapartprepaymentamount,overandabovetheregularEMIamount.EvenifyoupayRs
.
1,000amonth,youwouldsaveanamountofRs
4.7lakhandgettoreducetheloantenureby1.2years.
.

http://www.hindustantimes.com/business-news/utilitybytes/home-loan-prepayment-helps/article1-861275.aspx

1/3

11/11/2014

Home loan: prepayment helps - Hindustan Times

(seetable).
Whattoconsiderbeforepartprepayingaloan?
Themostimportantaspecttoconsiderbeforeyouactuallystartpartprepayingisensuringthatthereisno
guaranteedinstrumentinthemarketthatisgivingahigherreturnthanthehomeloaninterestrate.Ifthere
issuchaninstrument,youwouldearnmoreintermsofsavingsbyinvestinginitinsteadofpartprepaying
yourloan.
Todaytheinterestrateonhomeloansisaround10.5011%perannumandthereisnootherriskfree
instrumentthatoffersaguaranteedreturnthatishigherthanthat,saidShetty..Ifyouhavethemoney,
youshouldgoaheadandprepayorpartprepaytheloan.
optionsthatbanksofferInourexample,weveconsideredmonthlypartprepayment.However,manybanks
allowyoutomakepartprepaymentmultipletimesinayear.
HSBChomeloancustomershavetheoptiontomakemultiplepartprepaymentthroughtheyear,said
SaysManishSinha,head(consumerassets),HSBCIndia.Thereisnoupperlimitonthenumberoftimes
theywishtoprepay.Thereisnominimumamountrestrictionformakinganysuchpartprepayment.

Advertisement

mostviewed

WorldChessChampionship:
Anandsalvagesdrawagainst
Carlsen

BanksincludingStateBankofIndia(SBI)andAxisBankLtddonothaverestrictions.Somebankshavea
lockinperiodafterwhichyoucanstartprepaying.Forexample,KotakMahindraBankLtdallowsyouto
prepayafteralockinperiodofsixmonths.

Allyouneedtoknowabout
Modi'snewlyappointed
ministers

Afewbanksallowyoutopartpayonlyfewtimesayear.Forinstance,asperIDBIBankLtd'swebsite,they
allowpartprepaymentfourtimesayear.

SRK,Katrina,Modiinvited
forSalman'ssister'swedding
inHyderabad

Isthereacost?
Lastyear,theNationalHousingBoardhaddirectedallhousingfinancecompaniestodoawaywith
prepaymentpenaltiesforloanswithfloatingrates.Infact,eventheReserveBankofIndiainitsannual
policyannouncementfor20122013directedbankstonotlevyanyprepaymentchargesforhomeloans
takenonfloatingrate.Detailedguidelinesinthisregardareexpectedsoon.
Infact,somelenders,includingSBIandAxisBank,havewaivedsuchprepaymentcharges.Youwillhave
tobearasmallchargetosetanelectronicclearingserviceorstandardinstructionscharges,said
SiddharthGupta,cofounder,GNBindia.com,agroupbuyingportalforloans.Mostmajorbankswillnot
chargeanyothertransactioncharge.
Withnoprepaymentchargesonfloatingratehomeloans,payingoffregularlywillsaveyoumoneyand
reducetheloantenure.Infact,evenifyourlenderallowsyoutopayonlyonceaquarterortwotothree
timesayear,youwillfindadifferenceinthetotalinterestpaidandtheloantenure.Soifyouhaveahome
loan,takethatsmallstepnow.
HOMELOAN

NATIONALHOUSINGBOARD

stories photos videos

MORE

mostpopular
AMUVCunderfire,deniesbanningwomenfrom
library
58comments14minutesago
Live:WorldChessChampionshipAnandvsCarlsen
game3HindustanTimes
17comments51minutesago
MajorityforBJPinDelhi,butKejriwalmostpreferred
CMchoice:Survey
151comments19minutesago
EightnewministersinModiCabinethavecriminal
cases:Report
193comments10minutesago

BetweenarockandahardplaceHindustanTimes
134comments12minutesago

alsosee
SBIhomeloansrockingatRs.
188cradaytargetsRs.250cr

UnlockingtheIIMdoor

Maharashtratussle:FadnavisreadywithPlanBas
Sena,BJPsparinHouse
40comments2minutesago

LaLiga:BalescoresinRealMadridwin,Barcascrapethrough
'PakistanwinsChinainvestmentworth$42billion'
Maharashtra:Rs.150crrevivalpackagefor3ailingdistrictcooperativebanks
India'sfadingChinesecommunityfacespainfulwarpast

Advertisement

comment
Note:Bypostingyourcommentshereyouagreetothetermsandconditionsofwww.hindustantimes.com
blogcommentspoweredbyDisqus

http://www.hindustantimes.com/business-news/utilitybytes/home-loan-prepayment-helps/article1-861275.aspx

2/3

11/11/2014

Home loan: prepayment helps - Hindustan Times

HOME

LOAN EMI CALCULATOR

Find out how much loan you can get. Calculate your EMI in 2 mins.
Advertisement

india | world | comment | entertainment | life&style | sports | business | tech | autos | photos | videos | epaper | apps | htsyndication | movies | jobsinindia | elearning | livemint | #top
htdelhi/ncrsubscription
aboutus | contactus | workwithus | privacypolicy | disclaimer | sitemap | printadrates
Copyright2014HTMediaLimited.AllRightsReserved

http://www.hindustantimes.com/business-news/utilitybytes/home-loan-prepayment-helps/article1-861275.aspx

3/3