A home loan is the cheapest loan that you can get. You get good tax returns and can pay them back with ease. However, if you feel that you have your finances in check and can pay your home loans early and become debt-free, here are a few things that you should keep in mind.

Why should you pay your home loans early?

• You can start putting more of your income percentage towards your savings
• Have a debt-free life.

Does it benefit if you hold yourself from paying your home loans EMI early?

Paying your loans off early is always a pro for your financial plans. However, there are some benefits that still remain if you have to hold paying your EMI early.

1. Despite the fact that you have an ongoing debt, long-term investments in equities and mutual funds will bring higher returns than the interest that you are paying on your housing loans. Also, SIP returns have been higher for most people for 10-year intervals.
2. You can save more money by not paying the home loans early because of the tax breaks you will get on the interest paid. The effective trade-off is more in favour of not repaying the loan early.
3. Since you are using the bank’s money instead of your own money. You save yourself from inflation and your savings are better off.

Apart from the positives and negatives of paying your home loans early, you should also keep your finances in check.

What should you do instead of paying your home loan EMI?

• If you have other pending loans of higher interest, like, personal loan, credit card payment, car loan etc. Then, it is better to repay these loans before repaying the home loan.
• Do you have extra savings for emergencies? If you clear your home loan early but don’t have that extra cash for other rich expenses, then it’s better to keep your savings with you. A home is not going to pay for emergency bills.
• Save some money for your future family plans. If your paying the home loan is going to take money out of your children’s education fund or any other goals that you have in mind, then you shouldn’t repay the home loans and wait till your projects are satisfied.
• Invest. In most cases, investing and making a profit will give you more money on a 10-year average than paying your home loan will. You can continue to make more money and save tax benefits by holding off paying the whole of your home loan.

Consider all possible options before deciding that repaying your loan is what you want to do. Sometimes paying off a debt can be an impulsive decision. Talk to your family and friends, take financial advice and be sure that this is what you want to do.

Manoj Amarwal,

Saarthi Dream

(Saarthi for your financial dreams)