Paying off a home loan faster saves you thousands in interest and gets you closer to true financial freedom. Here are proven strategies you can use — either individually or in combination.
1. 📅 Make Extra Principal Payments
Instead of just paying the scheduled EMIs:
- Pay a little extra toward the principal whenever you can (monthly or quarterly).
- Even small additional amounts significantly reduce total interest and shorten your tenure.
Why it works:
Interest on loans is charged on the remaining principal. Reducing that principal faster means lower interest accrual.
2. 💰 Use a Shorter Tenure While Borrowing
If you can afford slightly higher monthly payments:
- Choose a shorter loan tenure when taking the loan.
- Even if EMIs are slightly higher, total interest paid over time drops significantly.
Example:
A 20‑year loan costs more in interest than the same loan over 15 years, even if the EMI is only moderately higher.
3. 📆 Make Bi‑Weekly or Semi‑Monthly Payments
Instead of one EMI per month:
- Split your payment into two half‑month payments.
- This results in 26 half‑week amounts = extra full EMI each year, cutting down your loan faster.
How it helps:
Extra EMI without feeling like a big extra payment.
4. 🪙 Apply Windfalls & Bonuses to the Loan
Use bonuses, tax refunds, gifts, or annual incentives to pay extra toward the principal.
Tip:
Instead of spending windfalls, think of them as ‘loan‑slashing fuel.’
5. 📊 Recalculate/Refinance When Rates Drop
If interest rates fall significantly:
- Refinance your loan to get a lower rate (if your loan allows).
- Or ask your lender for a balance transfer to a cheaper lender.
Refinancing often reduces total interest cost and can shorten your loan without increasing EMIs.
6. 💼 Increase EMI Slightly Each Year
If your income grows annually:
- Increase your EMI by 5–10% each year.
- This gradually accelerates principal repayment with minimal impact on your budget.
This strategy works especially well with salary increments.
7. 📉 Make Lump‑Sum Prepayments
Whenever you have extra savings:
👉 Use them as lump‑sum prepayments toward the loan.
Important Tip:
Before doing this, check:
✔ Are prepayment charges applicable?
✔ Can your bank adjust future EMIs or reduce tenure?
8. 📄 Amortization Awareness
Know your loan’s amortization schedule — it shows how much of each EMI goes to interest vs principal.
Early in the loan, almost all of your EMI goes to interest. Additional principal payments during that phase have the biggest impact.
📌 Summary: Best Practices
Strategy
Easiest to Start
Biggest Impact
Extra principal payments
✅
⭐⭐⭐⭐
Shorter loan tenure
⚠️ (higher EMIs)
⭐⭐⭐⭐
Bi‑weekly payments
✅
⭐⭐⭐
Lump‑sum prepayments
🟡
⭐⭐⭐⭐
Refinancing
🟡
⭐⭐
Increasing EMI yearly
🟡
⭐⭐⭐
📍 A Simple Formula to Estimate Savings
While every loan and rate differs, here’s a useful general concept:
New interest saved ≈ Extra principal × Remaining years × Interest rate
So:
👉 More principal you knock off early → Huge interest savings later.
💡 Important Tips Before Making Extra Payments
✔ Always check your loan agreement for prepayment penalties.
✔ Ask your bank whether extra payments will reduce tenure or reduce EMI (you want tenure reduction for faster payoff).
✔ Keep an emergency fund separate — don’t clear the loan and leave yourself broke.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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