Your queries: Loans – Make part-repayment on home loan to save on interest outgo | The Financial Express

Your queries: Loans – Make part-repayment on home loan to save on interest outgo

Home loan interest rates are rising with the repo rate going up; it would be beneficial to reduce interest outgo and it will help you in reducing the tenure of the loan.

Your queries: Loans – Make part-repayment on home loan to save on interest outgo
By paying off immediately, you are reducing your interest cost.

By Chaitali Dutta

I have to repay about Rs 15 lakh of my home loan. I have Rs 10 lakh now and will be able to accumulate the rest in six months. Should I repay in one go as I understand that one can do only one repayment in a year?
—Deepak Chandra

It is recommended that you pay off what is available now itself in round one. This part-payment will be considered in FY 2022-23. After accumulating for another six months you can do a second part payment in FY 2023-24. By paying off immediately, you are reducing your interest cost. Home loan interest rates are rising with the repo rate going up; it would be beneficial to reduce interest outgo and it will help you in reducing the tenure of the loan.

Will the interest rate vary according to the tenure in case of a car loan?
—Pramod Kumar

The interest rate of the loan would be the same across periods. However, it is the gross interest you pay to the bank/FI that will vary. The longer the loan tenure, the larger the gross interest outgo from the borrower.

After I clear my home and automobile loan, do I have to check my credit report?
—Mahesh Sonje

It is recommended to check the CIBIL score after one or two quarters once you have paid off a loan. In case you come across any discrepancy, it can be taken up with the bank/FIs while the matter is fresh, and the chance of quick rectification is higher.

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My wife took a home loan before her marriage. Now we have relocated to another city and she wants to sell the flat. We don’t have money to repay the full amount. What are the options for us?
—Varun Karpe

A property may be sold even before you close the loan account with your own funds. The steps to follow are: have the buyer ready and fix the sale price, share the copies of the bank loan outstanding with the buyer, and convey the sale details to your bank. It will provide you with the list of documents to give to them, share the process and timeline. The buyer/ his banker (if he is taking a loan) has to make the first payment directly into your loan account. Once the loan is closed, your bank will release the papers to you/ buyers’ bankers. Then the remaining sale proceeds are paid into the seller’s personal savings bank account.

To take a loan against securities, what all can be pledged? Is it more expensive than a personal loan?
—AK Mahesh

Usually, loans against securities can be taken against property (LOP), bank fixed deposits, shares in a Demat account, and sometimes even MF units may be pledged to banks to take a loan. Usually, the amount of the loan will be only 50% or 60% of the value of the security. The high margin is kept to cover the interest cost. The rate of interest would be lower than a personal loan as the latter is an unsecured loan.

The writer is personal finance wellness expert and founder of AZUKE Finance. Send your queries to fepersonalfinance@expressindia.com

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First published on: 05-12-2022 at 00:45 IST