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22-Oct-2024 | Home Loan
Home Loan Redemption: Taking a loan might be a smooth process for many people but repaying it is always a lengthy and challenging task. When you take a loan, the most important thing to remember is to repay it with timely payments for the entire loan tenure to maintain a sound financial appearance. When the loan is fully paid off, this process is known as home loan redemption. In this blog, we will discuss how a home loan can be repaid in simple steps.
When you buy a home by using a home loan, the house doesn’t belong to you completely right away. You have to pay back the amount that you borrowed from the bank or financial institution over time. Until you fully repay the loan, the lender has legal rights to your home. This means that if you stop to repay the loan, the lender can take back the house to recover their money.
When you take a home loan, you agree to repay the loan through monthly EMI payments. These EMIs are fixed or floating monthly payments which include both the principal amount and the interest. A home loan EMI calculator is a tool by which you can check how much you need to pay every month and for how long.
Paying your EMI on time is important. Missing or delaying EMI payments can harshly affect your credit score and may lead to penalties. Make sure that you have enough money in your bank account for the payment on the scheduled date every month.
A loan statement will be provided by the lender that shows your loan balance, how much you have paid, and how much is left. Check it regularly to ensure that everything is correct.
When you pay extra money apart from your EMI, they are called prepayments. It means paying more than your regular EMI to reduce your loan balance faster. It can help reduce the interest paid over time and shorten the loan period.
Start getting ready to make the last payments, as you get close to finishing your loan. This payment is bigger than usual, depending on how your loan is set off. Always make sure with your lender to check the exact amount you need to pay at the end.
After you have made your final loan payments, the first thing you should do is to ask your bank or lender for a No-Dues Certificate (NDC). This document is very essential to ensure that you have completely repaid your home loan. It shows that your loan is fully settled. The certificate can help if there arises any disputes to prove that your home loan is fully paid.
When you take a home loan, banks keep your original documents as security. This way the bank wants to make sure that if you fail to repay the loan, they can take legal action by using these documents. Once you fully paid the loan, the bank does not need to hold these documents. When you get your NDC (No-Dues Certificate), you should ask the bank to return your original property documents comprising sale deed and any other related documents.
When you take a home loan, the financial institution legally claims your property known as a lien. A lien means that the lender has the legal right to use it against their outstanding money. This is a safety measure for financial institutions. After you have finished paying off your loan, you need to remove this lien so that the property fully belongs to you.
Financial Freedom: Once you pay off your home loan, you are no longer obligated to make monthly payments. This provides financial relief and frees up funds that can be allocated to other priorities or investments.
Complete Ownership: Once home loan redemption is completed, you have 100% ownership and possession of the property. The banks have no more rights over your house.
Improved Credit Score: Paying off your home loan on time can boost your credit score, which can help you to get loans more easily in the future and at a competitive interest rate.
Repaying your home loan is also called home loan redemption. To become debt-free, it is important to follow steps and make sure that you pay your monthly EMI on time and if possible pay an extra amount to finish the loan fast. Always keep track of your payments and talk with your lender if you need help. Once the loan is paid, the house is completely yours.