Outlook Money
Home loans are among the most common types of loans people take for buying a home. Before taking out a home loan people establish clear schedules for repayment because they want to prepare for potential financial highs and lows that could occur during this time.
It is seen as a strategic financial decision to prepay a home, but it’s essential to weigh the pros and cons before committing.
Interest rates on a loan are calculated on the principal amount that one borrows. The repaying of the loan early can help in saving money on the interest, which is calculated on the principal amount that remains unpaid.
It is a smart move to pay the loan early as the loans carry a high rate of interest and prepayment minimises the total interest outflow.
Prepaying the loan lowers the principal amount outstanding on a home loan, thus leading to lower EMIs, which in turn will reduce the monthly financial burden while simultaneously improving cash flow management.