Repayment of Loan ,,how?

POSTED BY TheZionView ON January 11, 2011 9:48 pm COMMENTS (2)

I am applying for a loan in HDFC and they have this option in repayment of loan section.After reading this i am not getting much idea on the lumpsum investment part.

I will be getting some lumpsum money in next 2 years as i will be working in onsite soon.So i might want to repay the loan,does the last point make any sense to you can you explain?

  • Accelerated Repayment Scheme

    Accelerated Repayment Scheme offers you a great oppourtunity to repay the loan faster by increasing the EMI. Whenever you get an increment, increase in your disposable income or have lumpsum funds for loan prepayment, you can benefit by

    • Increase in EMI means faster loan repayment
    • Saving of interest because of faster loan repayment
    • You can invest lumpsum funds rather than use it for loan prepayment. The return from the investments also gives you the comfort of paying the increased EMI.

2 replies on this article “Repayment of Loan ,,how?”

  1. Atul says:

    Hi Prabeesh,

    (1) There is penalty cost for preclosure of home loan. That means you have to wait for certain duration ,for example 5 years before repaying the entire loan

    (2) If you are going to come back after 2 years I suggest dont repay fully. You will continue to get Home loan interest exemption upts Rs 1.5 Lacs and you can save taxes.

    (3) According to the recent SEBI rules, banks are supposed to check the source of funds used for home loan repayment. Make sure you have paid taxes for the money earned abroad.

    Regards

    Atul

  2. JayaprakashReddy says:

    Increasing the EMI amount is always good.

    Considering the current interest on home loan (after initial years it is around 12%), I dont think you will get that returns quickly in any investment, so it is better to pay off your loan whenever you get lumpsum fund. Make sure you dont pay prepayment charges by paying only to extent where part payment charges are nil.

    It always feels good when you dont have any debt on you.

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