Home Loan: How saving Rs 100 can save Rs 12 lakh on loan of Rs 50 lakh, check calculation

A home loan is more than just a mere financial tool; it serves as a gateway to fulfilling one's housing dreams. Across the vast expanse of our nation, numerous banks extend their helping hands through the provision of home loans, enabling individuals to acquire their cherished abodes. These loans come with interest charges and the convenience of monthly installments, ensuring that homeowners can gradually repay their debts.

Traditionally, home loans tend to stretch over a period of 15 to 20 years. However, it's worth noting that certain factors, such as the customer's eligibility, age, and various other considerations, can offer the possibility of elongating the loan term to a more extensive 25 to 30 years.

As the tenure of the home loan extends, so does the cumulative amount of interest that borrowers are obligated to repay. Hence, experts in the field consistently advocate for regular prepayments. By actively engaging in this approach, borrowers can expeditiously chip away at the loan amount, effectively shortening the overall tenure and leading to considerable savings.

Strategic loan repayment should be at the forefront of every borrower's mind. The objective should be to liberate oneself from the burden of debt before the stipulated timeline. By adopting such a proactive stance, individuals can substantially diminish the outstanding loan amount. To gain a better understanding of the potential impact, let us delve into the concept of saving Rs 100 per day, a seemingly insignificant amount that can remarkably accumulate into massive savings of Rs 12 lakh on a home loan amounting to Rs 50 lakh.

Loan repayment offers a myriad of options. According to bankbazaar.com, directing 5% of the loan amount towards repayment on an annual basis has the power to slash the loan tenure from 20 years to a mere 12 years. Alternatively, the proactive tactic of making additional equated monthly installments (EMIs) each year can effectively condense the loan duration to a commendable 17 years. Interestingly, customers possess the flexibility to augment their home loan EMIs by 5% annually, thereby paving the way for complete loan settlement in just 13 years, an achievement worthy of applause.

Over the course of a year, this seemingly meager amount accumulates to a substantial sum of Rs 36,500, which can be judiciously utilized for prepayment purposes. Fisdom's website provides enlightening calculations, elucidating the extent of savings that can be achieved by embracing this seemingly modest daily habit. By diligently saving Rs 100 each day, one can amass a staggering sum of Rs 12 lakh in savings over a 20-year period, given a home loan of Rs 50 lakh with a 9.5% interest rate. Expanding the horizons of possibilities further, if the loan tenure extends to 25 years, the potential savings soar to an impressive Rs 20 lakh.

Note: Various banks provide loans at varying interest rates for debt instruments such as home loans. We do not recommend relying on a specific loan calculator for determining your loan. Instead, it is advisable to seek guidance from a financial expert.

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