S2 Ep009 Home Loan repay in planned way | Reduced years from 25 to 19 years

The Absurd on AIR |Podcast Show

We are living in a time where we can only afford buying home by taking loans. I am talking about the middle class families of course. The born rich people never have to deal with this.

Now banks offer you the loan and charge interest and the interest varies from person to person as per the CIBIL and the earning they have.

Banks have slab of interest, like for men upto X amount the interest will be lets say 6 to 7, so on and so forth.

Now if you fall in this category, your interest will be somewhere between 8-9. But you see there is difference of 1% in the slab. And the home loans are not a small amount thing of course. So even 0.1 difference will also make huge impact.

Let us say when I took loan bank charged 8.9 % interest from me. I kept paying with this interest for almost 8 months.

Then Bank reduced its rate of interest slab. Now if the reduction in the interest rate is due to RPLR bank will automatically give effect quarterly. But the reduction is not due to RPLR then you have to check with bank and make it reduces. So lets say I inquire with bank. They said yes you are eligible for 8.2% now.

The difference is still huge 8.9-8.2= 0.7 basis points.

Now when you apply for reduction bank charges fees of 5900 as mentioned on the website. This may vary. So I went to the branch and they charged somewhere 2.9 k only. And they give option if you want to reduce the Year or amount of EMI. I choose years reduction and if you look at the difference you will realize what you are missing.

1. The tenure is 25 years- I paid till day 18 months and if I look at the pending years its 19 years

2. If you look at the balance of actual paid it should be 25-1.5 (18 months) =23.5

3. But actually I only have 19 years pending so the balance reduction in year Is due to the interest rate which is +23.5-19=4.5 year. so you can say I paid loan for 6 years in 1.5 year.

2.Another thing you can do to complete the loan early is, increase the EMI every year by 2000 at least. And see the Impact. You will end up completing 19 years in appx 16-17

3.Subsidy will also help to reduce the Emi.

4.You can at least increase 2%-5% of EMI every year.

5.Random prepayment will also be helpful.

So there are many ways. Ultimately we keep paying the interest portion to banks and our main principal is intact. SO early payment or increasing EMI will help you Save the interest portion.

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