Home Loan Hack: Save Rs 28 Lakh & 5 Years On Rs 70 Lakh Loan
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When it comes to repaying a home loan, even a minor change in strategy can lead to significant long-term gains. One smart move many borrowers overlook is opting for a shorter tenure. While higher monthly payments might seem intimidating at first, the financial benefits down the line can be considerable. By increasing your EMI by a modest amount, you could end up saving lakhs in interest and reduce your repayment period by years. Here's how to make that shift wisely.
Why Loan Tenure Matters More Than You Think
Home loans are usually designed with long repayment windows — typically 20 to 30 years — to make monthly instalments manageable. However, this comfort comes at a cost. Longer durations increase the overall interest burden, meaning you pay far more than what you borrowed.Shorter tenures, on the other hand, result in higher monthly instalments, but the total interest paid across the loan term drops sharply. In essence, you’re buying financial freedom at a discount, provided your cash flow supports the higher EMI.
Understanding EMI and Interest Breakdown on a Rs 70 Lakh Loan
Let’s look at a typical case to illustrate this. Imagine a home loan of Rs 70 lakh with an interest rate of 9.5%. For a 30-year tenure, the EMI works out to roughly Rs 58,860. Over the entire loan period, the total interest paid would exceed Rs 1.41 crore, taking the overall repayment amount to over Rs 2.11 crore.That means you would pay more than double the amount you originally borrowed. But there’s a better way.
What Changes with a 25-Year Tenure?
Now let’s say you choose a 25-year loan term instead. Your EMI would increase slightly to around Rs 61,159 — that’s only Rs 2,299 more per month. However, this small increase leads to substantial savings. The total interest drops to approximately Rs 1.13 crore, reducing your total repayment to Rs 1.83 crore.In summary, by paying just a bit more every month, you end up saving around Rs 28 lakh in interest alone and also finish your loan five years earlier.
Key Benefits of a Shorter Loan Term
Save Lakhs in Interest
A shorter tenure directly reduces the total interest paid over the life of your loan. These savings can be redirected towards other financial goals, such as investments, your child’s education, or retirement planning.Achieve Financial Freedom Sooner
By completing your loan ahead of time, you free up your income for other uses. Whether it's pursuing a business idea, travelling, or investing in property, paying off debt early expands your financial possibilities.Build Equity Faster
With a shorter loan term, a greater portion of your EMI goes towards reducing the principal amount right from the start. This helps you build ownership in your property much faster than you would with a longer tenure.Can You Afford a Shorter Tenure?
It’s essential to assess your monthly cash flow and budget before committing to a shorter tenure. An EMI that stretches your finances too thin could lead to defaults or missed payments. Use online EMI calculators to compare different tenures and check how much more you need to contribute monthly. If you receive regular bonuses or expect salary increments, a higher EMI might not be as burdensome as it seems now.Steps to Switch to a Shorter Tenure
If you already have a long-term loan, here’s how you can switch:- Contact Your Lender: Ask about restructuring options and whether tenure reduction is possible.
- Consider a Loan Transfer: If your current lender doesn’t offer flexible options, you can transfer the loan to another bank with better terms.
Disclaimer: This article is for informational purposes only and should not be considered financial advice. Please consult a qualified financial expert or your loan provider before making any changes to your repayment structure.