I have the money to prepay my outstanding home loan at one go. How is it beneficial?
One of the biggest advantages of repaying any loan is being debt free
I have the money to prepay my outstanding home loan at one go. How is it beneficial?
Prabhu Chandran, Chennai
Unlike some years ago when banks used to charge a prepayment fee when someone closed their home loan before its tenure, there are no such charges anymore. This is to encourage home loan borrowers to consider repaying the loan earlier than scheduled. One of the biggest advantages of repaying any loan is being debt free. However, in case of home loans, one may wish to consider the tax implication in doing so. As you can claim tax benefits on both the interest and the principal component of the home loan, check where you stand in case you prepay in part or full. The decision to prepay the remaining loan amount will depend on whether you are able to earn more income on the same amount kept in a bank or by investing, than the rate of interest charged on the loan amount after considering the tax benefits available to you.