Amazing Home Loan Schemes: Take a Loan and Pay Only Interest for 3 Years!

Home Loan: Do not increase the debt burden due to low EMI, understand the mathematics of cheap loans like this

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new Delhi. The Reserve Bank of India (RBI) has just kept the repo rate at a 20-year low, making all types of retail loans affordable. To take advantage of this opportunity, a large number of people will be preparing to take a home, auto or business loan.

If you are also planning to take a loan, then do not extend its tenure in order to keep the EMI amount low. It will make you less profit and more harm. Not only this, customers who already have a loan and want to extend the tenure to reduce the EMI burden, then they have to think about it. This may give you immediate relief, but repaying the loan in the long term can increase the burden of lakhs.

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Emphasize on reducing interest instead of EMI

Ashwani Rana, a banking expert and secretary of the Voice of Banking, says that the customer should insist on reducing the interest rate instead of reducing the amount of EMI while taking a loan. Since home loans are of longer tenure, do not extend the tenure just because your EMIs will go down. Its effect will be marginal on the amount of EMI but the total amount you have to pay as interest will be very high.

Understand the math of loss like this

If you have taken a home loan of Rs 30 lakh from SBI, which has an interest rate of 7.40% and the repayment tenure of the loan is 20 years. In such a situation, your EMI will be Rs 23,985 and a total of Rs 27,56,325 will have to be paid as interest. Thus, the cost of the entire loan would come to Rs 57,56,325. Now, you have taken the same loan at the same interest but increased the repayment period to 30 years. You will have to pay Rs 20,771 as EMI which is already less, but the total interest payable will be Rs 44,77,702 and the total cost of the loan will be Rs 74,77,702.

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Now see how much burden increased in 10 years

In this way, while the EMI amount has come down by Rs 3,214 after extending the tenor of 10 years, you will have to pay Rs 17,21,377 more as total interest. This amount is about 60 percent more than your previous interest paid.

Long loan will affect savings

Adil Shetty, CEO, BankBazaar.com, says that find the right balance between your EMI repaying ability and the loan tenure. Do not take too long loan, as it increases your interest, which will reduce your savings in future. ideally

EMI should be up to 40% of your salary (Take Home Pay). If you do more than this, it will be difficult to meet the daily expenses.

Tags: bank loan, Home loan EMI

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