Re: Good one!
by A Guest on Jan 17, 2011 02:58 PM
Does it make any difference at what time we prepay the loan amount? Begening of the Quarter/Middle of the Quarter/End of the Quarter?
It's always better to remain "LOAN FREE" but in today's materialistic world it's not easy.For an average salaried person you have to take loan for something or the other especially a loan for the home you wish to purchase.I had also purchased a house and availed the facility of loan from a private bank for Rs.18 Lacs in 2003.Later on in 3 months time I paid of Rs.5 Lacs from my CPF thus reducing my EMI (from Rs21000/- to @ Rs.15000/-).I saved my hard earned money and after 3 years I paid of Rs.5lacs and again after 2 yrs.Rs.2 Lacs to the bank.As of today I am having only @ Rs.3.5 Lacs.balance left(principal interest) which I am going to pay off shortly and not issue any PDC's to the bank.Though we get a 1.5 Lac rebate for the home loan but you are also paying the EMI's monthly which erodes your savings.So my advice is that if possible and if you have decent savings or get any incentive then better to pay off the loan amount and live freely.Whether it is fixed rate of interest or floating due to the bank rules and changing interest rates the average money you pay to bank comes out to be nearly same.
It's always better to remain "LOAN FREE" but in today's materialistic world it's not easy.For an average salaried person you have to take loan for something or the other especially a loan for the home you wish to purchase.I had also purchased a house and availed the facility of loan from a private bank for Rs.18 Lacs in 2003.Later on in 3 months time I paid of Rs.5 Lacs from my CPF thus reducing my EMI (from Rs21000/- to @ Rs.15000/-).I saved my hard earned money and after 3 years I paid of Rs.5lacs and again after 2 yrs.Rs.2 Lacs to the bank.As of today I am having only @ Rs.3.5 Lacs.balance left(principal interest) which I am going to pay off shortly and not issue any PDC's to the bank.Though we get a 1.5 Lac rebate for the home loan but you are also paying the EMI's monthly which erodes your savings.So my advice is that if possible and if you have decent savings or get any incentive then better to pay off the loan amount and live freely.Whether it is fixed rate of interest or floating due to the bank rules and changing interest rates the average money you pay to bank comes out to be nearly same.
if you have money then calculate the charges of prepaying (i.e. prepayment penalty, service tax on prepayment penalty any other charges which your bank levies, read the agreement or ask the bank via call centre or email) the loan against the interest you would pay continuing the loan till the end. if you save then its a wise decision to close the loan account. remember to get an acknowledgement for the prepayment and be very clear to get loan closure letter / NOC / No dues certificate along with the Post dated cheques. See to it that they've returned all the cheques. Many banks keep atleast one cheque back. The reason is if they find any amount outstanding any time then they can use it. also note when you ask them about the missing cheque they will refuse that they have it. so ensure you mark a stop payment. assertively follow up for your original documents of home. its great to get rid of this so called ill culture of loan at the earliest and call our house really our own. you can do whatever you like.
Re: get rid of it as soon as possible!
by Almighty on Jan 12, 2010 10:51 AM
All banks offer floating rates even fixed rate is not fixed as it can increase as their PLR rates increase.
I changed from my banks interest rate of 12.5% to 7.5% fixed for entire tenure of the loan, from a Non Banking Finance Corp using one of my contacts
Re: Re: get rid of it as soon as possible!
by Almighty on Jan 12, 2010 10:53 AM
I changed from my banks interest rate of 12.5% to 8.5% fixed for entire tenure of the loan, from a Non Banking Finance Corp using one of my contacts.
I'll be saving over 14.6 lacs over the next 15 years by changing over to N B F C. I can now save and invest this amount to earn more or repay the loan 35% faster than before. why work longer to make the bank richer at your cost ?
If interested in lower interest u too can contact Sujith (0) nine-nine eight-zero eight-zero seven one-six four
So the decision to repay your home loan should not be driven by the stage of your loan tenure, but by prevailing interest rates and availability of cash and another very important point is you are taking the tax benefits of house loan or not. If you are taking the tax benefits then if interest amount in a year is greater than 1.5 lac then only repay by principal amount so thatinterest become 1.5 lac otherwise leave it for normal period.
Re: Home Loan repayment
by kiran kumar on Jan 11, 2010 04:26 PM
Also depends on what are the alternatives one has to do with the money. If the chances are that they will be sucked up by your forthcoming credit card bills, it is always better to pay off Housing Loan.
Always look at your Housing loan interest (when within 1,50,000) consider you are paying 0.7 times of what bank is quoting (if your current loan rate is 11% then effectively you are paying 7.7%) If you can make more than that (post tax implications) by not pre-paying you should go with your options, else prepay the loan.
Another hybrid option is to move your housing loan into a scheme that allows you to withdraw prepaid amounts when required (similar to MaxGain offered by SBI). This ensures liquidity and at the same time lowers your interest burden when your cash is sitting idle.
