Top 5 Things You Must Know About Home Loan EMI
“Before diving deep into anything, let’s understand what EMI is.”
What is meant by an EMI?
EMI consist of principal value and interest on the Top 5 Home Loan EMI principal amount. It is computed by considering the loan amount, the time horizon for loan repayment and the rate of interest on the borrowed amount. When it is about buying a home, one of the crucial factors to consider is the money that is borrowed. The next key parameter to factor in while choosing a loan is the loan tenure. The third most important aspect being considered is the rate of interest. These 3 crucial aspects determine the EMI or equated monthly instalment.
Each month, part of the loan EMI gets adjusted towards the interest payable amount, and the balance gets adjusted towards principal repayment. An EMI refers to the amount you must pay monthly to repay your outstanding loan. Repayments are easier with EMI as you can make your instalments monthly.
∙ Before availing of a home loan, ensure to evaluate how much the monthly payment will be. This is because borrowing money is an important financial commitment.
∙ EMI, on the contrary, is generally constant for the entire debt duration and must be rapid month on month over the loan term. During the initial years of a home loan’s tenure, you often pay most in the form of interest constituent. When you make a loan repayment, a higher proportion of payment is applied to a principal constituent. EMIs are decided using the reduction balance technique, which may work in your favour if you are a borrower.
When making pre-EMI repayments, you are just making payment of the interest constituent. You are not repaying anything towards the principal component if you hold a pre-EMI. You can pay the pre-EMI when your apartment or home is getting constructed.
How’s it distinct from EMI?
When you opt for a home loan from an NBFC like IIFL home loan or a public sector bank like Canara bank home loan or any private sector bank and decide to make the interest payment over time instead of upfront, you must continue to pay the interest constituent until the home is done. You must repay the EMI after the job is done. When you are done with this stage, EMI starts to follow. Pre-EMI mode lowers cash outflow more than standard EMI. This option might even be selected when the borrower does not hold sufficient income to pay monthly payments.
What’s pre-closure for a loan?
Early home loan repayment by the borrower is known as home loan pre-closure. The alternative solution is to pay in totality the upfront amount to complete the payments. When you, as a borrower, have the funds, it is possible for you to try and make full payment ahead of the schedule mentioned in the home loan agreement.
Prepayment on a home loan refers to making payment of your whole or half the outstanding amount ahead of schedule. The majority of home loans available are for the term duration of 15-20 years. This is considered one of the best investments. In the occasion you decide to close this earlier than the scheduled date, you should send across a letter to the financial institution or bank. However, in the case you prepay your home loan, you may save a considerable amount that was intended to be repaid in the form of interest.
∙ Pre-closure or prepayment of your home loan amount reduces your interest constituent.
∙ Outstanding principal constituent is lowered.
∙ Financial stability is offered
∙ It makes you relaxed when you are out from under the debt burden.
Note that lenders offering a home loan at a floating interest rate Top 5 Home Loan EMI tend not to charge any pre-payment penalty. The next important factor to consider is before closing a deal on a home loan, and you require a considerable amount of money. So, initially, assess your finances and compute the overall amount before you make a specific decision. Go for the prepayment option only if you think doing so would make a significant difference in your financial budget.
Also, Check and Apply: Canara Bank Home Loan
What’s e-mandate or eNACH?
Electronic NACH or eNACH is basically a system that permits you to place payments online. The phrase electronic NACH uses NPCI NACH. E NACH or mandate both are services that permit you as a customer and businesses to manage all their recurring expenses like phone bills, utility bills, insurance premiums, SIPs, school fees and others. Following are a few of the terms that you must know about eNACH.
NPCI – National Payments Corporation of India is just a regulatory body held by the Indian Government to oversee all the retail linked payments in India. It was initially set up with the support and guidance of the RBI (Reserve Bank of India) and IBA (Indian Banks’ Association).
Sponsor banks – These are the banks empanelled with NPCI for the motive of facilitating the e-mandate procedure.
Destination bank – This is the bank where you, as a customer, hold an account from which you want the automatic debit to be done.
∙ Formation of an authenticated and valid mandate by you as a customer through the electronic mode.
∙ Shorter mandate acceptance and auto acceptances of the mandates allowed.
∙ Assured and secured mandate acceptance – mandates must be initiated by you to your banker.
How can you handle bounced EMI?
In case the mandate is turned down by the sponsor bank, the Top 5 Home Loan EMI destination bank must remove the registration of the mandate from the core banking system. The customer bank or the destination bank must send a message to the customer when the mandate is turned back by the sponsor bank and even must present a rejection reason.
You must make payment of the EMI bounce cost in case the cheque is returned due to an inadequate account balance. The thorough penalty involves late payment penalties, past due interest, bank fees, collection costs, and others. In case you witness any bounced EMI, the most crucial thing to do is immediately activated. For this, you can call your bank or check if there is any fund in your account. You must make the payment of the EMI after the matter is settled.