By Chaitali Dutta
l I had taken a home loan five years back. Is it better to repay two extra EMIs every year or increase the EMI by 5% every year to clear the loan early?—Ashok Bisht
It would be beneficial to pay two extra EMIs every year, reducing the tenure (hence lower total interest outflow) more than by increasing the EMI by 5% every year. Paying 14 EMIs in a year is equivalent to 17% increase every year, hence it is better than a 5% per annum increase in EMI.
l I am planning to buy a car with a loan of Rs 5 lakh. Can I prepay the loan, within one year without any penalty?—Deepak Kumar
Usually, the terms and conditions at the time of sanction are that 100% repayment is possible after 24 or 36 months without a penalty. However, if you have the funds and want to prepay within 12 months, there would be a 2-3% prepayment charge. Compare a few leading car loan providers and choose the one that would ensure minimal penalty on prepayment.
l I want to build an additional floor by taking a loan. I will retire after five years. Can I get a short-term home loan of Rs 15 lakh?—Arjun S
Yes, a five-year home loan is possible. The mortgage of the said property will be one of the conditions of this loan.
l As interest rates have come down now, should I look for a loan against property (LAP) at a fixed interest rate for five years?—Anurag Singh
Yes, you may look for a fixed-rate LAP now. However, the current applicable rate on a fixed-rate loan will be higher than the rate on a floating-rate LAP.
l I had taken a home loan 10 years ago and it is linked with MCLR. How can I switch to a repo-linked home loan to reduce the interest outgo?—Dhruva Gupta
Approach your lender with this request. They should be able to migrate your loan to a repo linked loan. This is also your opportunity to shop for a better deal in the market. A lower rate approval will provide you with a negotiating tool with your existing lender.
l Is it possible to take a two-year loan to buy a car and prepay early? —Saurabh Raj
The usual tenure of a car loan is five to seven years. You may have to get a special sanction for a two-year loan with a prepay-ment clause. Usually, there would be a penalty for prepayment in the first 12 or 24 months.
The writer is founder, AZUKE Personal Finance Advisory. Send your queries to fepersonalfinance@expressindia.com
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.