The special feeling of owning your own home cannot be expressed in words. Being a homeowner has numerous benefits, and a PNB Housing Loan helps you realise these benefits.
However, home loans are significant long-term financial commitments that can last up to 30 years. And if you’ve taken a home loan for a longer tenure, it might make sense to prepay some portion of it to reduce your interest outgo. It will also give you room to focus on other financial responsibilities.
5 Clever Ways to Prepay Your PNB Housing Loan
Here are some steps you can take to prepay your PNB Housing Loan so you can enjoy a debt-free home
1. Use Increased Disposal Income to Reduce EMI
The longer your loan tenure, the more interest you end up paying. So it is always advisable to increase your EMI amount as and when your disposable income allows.
Whenever there is an increase in your salary, try to increase your EMI payment in the same proportion. It will help you pay off your debt early and prevent you from making extravagant expenses with the increased income.
The more EMI you pay, the lower your principal amount and the corresponding interest will be.
2. Direct Windfall Gains towards Prepayment
Windfall gains are any unexpected gains or profits that one may occasionally chance upon. These include a spike in profit, yearly bonus, incentives, unexpected inheritance, and a lottery winning.
Channelising such gains is a good way of reducing your debt burden. You can use it to make partial bulk payments to reduce a significant chunk of the principal amount.
3. Choose Loans that Allow Part Payments
The loan sanctioned to you is based on your income and credit worthiness at a particular time. As the years go by, your income and affordability will likely increase. So it is always wise to opt for loans that allow prepayment without additional charges.
As such, you can make part payments during favourable situations without worrying about extra charges.
You can prepay floating interest rates PNB Housing loan at any stage without incurring additional charges. PNB does not charge for prepayment of fixed rate home loans as well if the prepayment is made from your own sources. But a penalty of 2% is applicable for shifting loans to other financial institutions.
4. Invest to Meet Prepayment Targets
Having a prepayment target in your mind is always helpful so you can start saving accordingly. For instance, if you plan to prepay one lakh next year, start saving 8500 monthly. You can put your savings on recurring deposits and earn interest on them.
By planning and strategising your savings, you are bound to meet your prepayment target without any hassle.
Another way of mobilising your saving is starting a SIP plan. Even if you invest only 3000 each month, you will be able to collect a handsome at the end of 10 years. You can use this bulk sum to clear a considerable chunk of your loan and cut off your tenure. Further, you can also save taxes during the procedure.
Other investing options that provide good returns are shares, stocks, fixed deposits, mutual funds, post office saving schemes, etc.
5. Utilise the Loan Overdraft Facility
What deters most borrowers from making bulk prepayments is the thought that they may need the fund for an emergency in the future. They would rather keep the money in an emergency fund than prepay their loans.
A home loan overdraft facility is a good solution for the situation. The facility allows you to deposit a surplus amount on your overdraft account with the liberty to withdraw them if the situation warrants. The amount deposited above the EMI will be considered part prepayment and reduced from the principal balance during interest calculation.
It is a safe option to make part prepayment and close your loan account faster.
Whenever you make a long-term financial commitment, it is crucial to choose your lender wisely. Be aware of their policies and prepayment criteria to avoid rude shocks later.
PNB Housing is committed to making your home-owning journey as smooth and comfortable for you as possible. The excellent PNB Housing Finance customer feedbacks are a testimony to that.
You can also use the PNB home loan prepayment calculator to calculate a suitable prepayment amount. It will help you understand the interest you will save when you make such prepayments. You will also be able to view the new amortisation table and pay your future EMIs accordingly.