Tip1. Calculate the actual monthly instalment while comparing loan offers
Loan rates are deceptive. There are different methods of calculating the EMI amount from loan rate . It may happen that a higher rate loan will have lower outgo it it is daily reducing balance than a lower rate one which is monthly or yearly rest.
Tip 2. Bargain Hard, Get as many competitor quotes
Get Quotes from probable loan providers. Let them fight each other and reduce the EMI amount to get you.
Tip 3. Read the Loan Document carefully before taking a loan.
Yes , I mean read the loan document including the small grey letters at bottom. Do not get carried away by the agent's or agencies words. In case of any dispute, only valid is what is written in the loan document. Donot sign at the places shown to you without fully understanding what is written.Look for penalties if prepay, How many times you can prepay etc.
Tip 4. Prepay maximum in the initial period
During initial period most of your EMI is utilized as interest rather than principal repayment. But any amount you prepay is going entirely into reducing the outstanding principal.So when you get your performance payout, use that to reduce your principal amount outstanding.
Tip 5. Reduce repayment period rather than repayment amount
As interest rates decreases your outstanding also decreases month after month in a better way.
When this happens or when you prepay an amount Loan provider will "offer" to reduce the EMI and keep the period unchanged.Do not opt for this unless there is a reduction in your earning or you are unable to maintain the original amount.
Opt for reducing the pending period when interest rates reduce or when you make a prepayment.
Tip6. Keep all the relevant documents safe
It may happen that you need some of the loan related documents after some years. So keep a file exclusively for Loan related papers and keep that in an easy accessible area.
Please feel free to comment using the comment button .
