How to repay a 20 year loan in 10 years? Learn how to save money through ‘Smart Savings’ | How to repay a 20 year loan in 10 years, know simple tips to save money from Smart Savings
If repaid early, the benefit is doubled. You can repay the loan in a short period of time and earn a good income by investing the rest of the money elsewhere. (How to repay a 20 year loan in 10 years, know simple tips to save money from Smart Savings)
Learn simple tips to save money from ‘Smart Savings’
New Delhi: How much better would it be to repay your 20-year loan in 10 years? Then invest the rest of the money somewhere and get good money. It is possible. This is called ‘smart saving’. Just need to know how to repay by increasing EMI. So that the term of the loan is reduced by half. It is not beneficial to keep the loan for a long time, as it increases the interest burden. If repaid early, the benefit is doubled. You can repay the loan in a short period of time and invest the rest of the money elsewhere to earn a good income. (How to repay a 20 year loan in 10 years, know simple tips to save money from Smart Savings)
There are many people who buy a home with a home loan. A loan taken a few years ago would have been taken with a different interest rate then, but now the interest would have gone up. Then you need to understand how much interest you have to pay on the loan. You will notice that you are going to pay more interest than the original amount in the long run. The only way to avoid this is to repay the loan as soon as possible.
Keep the loan term short
If you repay the loan in pre-payment, the interest rate will come down. A 20-year loan can be completed in 10 years. When taking out a loan, people often put off more time to reduce their EMI. So there is a perception that you have to pay less. But you have to pay more interest in such a situation. That’s why financial advisors recommend that you take out a short-term loan.
How to reduce loan term?
Regarding loan pre-payment, financial planners say that if the income is increasing, the EMI should be increased every month. If you increase the EMI by 5% on each 20-year loan, the loan term can be reduced to 8 years. If the EMI is increased by 10%, the 20-year loan will expire in 10 years. The borrower has two options to reduce the interest on the loan. You can either deposit a lump sum of Rs 5-10 lakh or increase the EMI amount after 5 years.
How much interest on a loan of Rs 50 lakh?
If the borrower repays a prepayment of Rs 10 lakh after 5 years, he gets a big relief on interest. Suppose a person has taken a loan of Rs 50 lakh for 20 years. The loan carries an EMI of Rs 38,765 at 7% interest. If you repay Rs 10 lakh after 5 years, the loan term will be reduced to 5 years. Earlier, the base interest was Rs 26.65 lakh, now it will go up to Rs 12.87 lakh. This will save Rs 13.78 lakh. If you invest the same Rs 10 lakh (which you have paid as pre-payment), after 10 years you will get Rs 21.59 lakh at 8% interest. If the interest is 12 per cent then the amount is 25.94 lakhs and if the interest is 12 per cent then 31.06 lakhs will be available.
How much interest can you save?
You can increase the amount of each EMI by Rs 20,000 after 5 years on a home loan of Rs 50 lakh. If you have invested money somewhere and are making a good income from it, you can increase that EMI and use that money to reduce interest. If the EMI increases by Rs 20,000, the loan repayment period will be reduced by 7 years. If the EMI is not increased, the actual interest will be 7% at Rs 26.65 lakh. If the EMI is increased by Rs 20,000, the new interest will be Rs 13.32 lakh. This way you can save up to Rs 13.33 lakh. (How to repay a 20 year loan in 10 years, know simple tips to save money from Smart Savings)
– Alenz (9 TV9English) June 28, 2021
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