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A Quick Guide to Plan Home Loan EMIs

Clix February 8, 2021

 

Whether you have an existing home loan or you are planning to take one soon, you must know that home loan EMIs are huge financial responsibilities and take a significant chunk from your regular earnings. It’s imperative to manage these EMIs appropriately so that your monthly budget does not go haywire. Here is a quick guide to planning your home loan EMIs.

Once you apply for a home loan and the cycle of EMIs begin, you have to reduce your monthly expenses to pay them on time. Defaulting on these instalments can affect your credit score negatively and lead to further financial troubles in the future. Therefore, it is better to plan your EMIs in a way that they do not lead to any financial crunch in your household. Here you will find a few useful tips that can actually break or make the situation.

 

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Consider Your Earnings

Your present earning is one of the most significant factors that go into determining the amount of your EMIs. A stable job in an established industry ensures that your income is only going to increase in the future and you will be able to pay a higher amount of EMIs easily. Make sure that your EMIs are not more than 40% of your monthly income. Use the Home Loan EMI Calculator to determine your EMIs and choose a suitable plan. Also, ensure that your instalments do not affect your expenditures and investments, and also spare some room for savings.

Keep Track of Your Expenditures

While figuring out your EMIs, don’t just count-in your current expenses. You need to consider increased expenses as well during the term of the loan down the line. Both current and future expenses include your personal expenses, lifestyle expenses, medical expenses, family expenses, kids’ expenses, etc. Do not forget to factor in inflation surges in the future. So, play safe while planning your home loan EMIs and keep making payments on time.

Look at Your Repayment Capacity

As mentioned before, your capacity to repay the loan depends on a balance between your earnings and expenses. Lenders want to ensure that you can repay your loan on time, according to which they calculate your repayment capacity and loan eligibility and decide your EMIs. Calculate your repayment capacity depending on the amount of surplus income you may take out of your regular earnings. This surplus is the amount left after paying all your bills, liabilities, fees, rents, and other financial obligations.

Start Early

Age is definitely a very significant factor while planning your home loan EMIs. Your age can have a great impact on your interest rate. If you apply for a loan in your 20’s, you have enough time to earn and repay your loan. More financial responsibilities usually come much later in life. Since you have just started your career, you are more likely to earn more get promotions and increments in the coming years.

However, if you are already in your 30’s, your expenses are going to increase more than your income. You will have a spouse, kids, and parents who are likely to take a major chunk of your income, and you have more chances of falling back on your EMIs. So, a general rule of thumb is to take a home loan early so that you can pay it off by the time other obligations enter your life.

Be Ready to Change Your Lifestyle

Once you take a home loan, your EMIs can significantly affect your standard of living and lifestyle choices. Everything from your dining and vacations to shopping and other leisure activities will have to take a backseat since you have to take out a big portion of your monthly earnings for your EMIs every month. Although you should be ready to compromise a little on your luxuries, choosing the right home loan plan and planning the EMIs wisely won’t cut much deep.

Select the Right Loan Tenure

Some people pay bigger EMIs and finish their loan quickly so that their loan term does not run for decades. However, if such an idea does not appeal to you, you can always take a home loan and pay your EMIs slowly and steadily over a period of as long as 25 years. If you don’t mind carving out some amount from your earnings for several years, then select a long loan tenure.

When you find a dream home, you may feel convinced to stretch your budget and take a bigger home loan than you can afford. However, in such a case, everything should be managed and planned properly. So, find a home within your budget and select the tenor that you are comfortable with.

Compare Interest Rate

The interest rate applicable on your home loan may not stay the same throughout the loan tenor. Fixed interest rates are usually high, and they do not decrease even when the lender changes it for all other plans. Prefer a loan plan with a floating interest rate. Some lenders also offer you a choice of selecting a fixed interest rate for the first 2-3 years, and then change it to floating.

Factor in Other Considerations

While planning your EMIs, you must consider your lifestyle, current income, income changes, the stability of the current employment, career choices in the future, goals, retirement plans, future expenditures, etc. Don’t forget added expenses in the future, such as a child’s birth, their studies, new car, medical expenses, parents’ medicals, unexpected expenses, and others. It is only you who can decide whether you can spend 40% of your earnings on home loan EMIs, save 10%, and manage your life with 50% of your total income.

According to experts, you must consider buying a house only when you attain a stable job and certainty in life. Fix a goal and start saving. Once you take a home loan, maintain a high credit score by making your payments on time.

Looking forward to applying for a home loan? No place can be better than Clix Housing. With an easy loan application and approval procedure, you can have your home loan in no time. However, use the abovementioned guide to plan your home loan EMIs and make an informed choice.

For any queries, find us on Facebook, Instagram, Linkedin, Twitter, or Whatsapp

You can also reach out to us at hello@clix.capital or call us at 1800 200 9898

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