Discover the financial impact of prepaying your HDFC home loan with our easy-to-use Home Loan Prepayment Calculator—see how early payments can lower your total loan expenses!
Many homeowners deal with significant debts for years, leading to a common desire to settle housing loans quickly. HDFC Bank offers a prepayment option that lets borrowers repay their home loans early.
This blog explains how using HDFC Bank’s prepayment calculator can help reduce the total interest you pay.
HDFC home loan woes keeping you up at night? You deserve a shorter tenure!
Home Loan Prepayment
A home loan typically lasts between 15 to 30 years. By prepaying, borrowers can repay a portion of their loan ahead of schedule.
Home loan prepayment reduces the outstanding loan balance, which significantly cuts down the total interest paid over the life of the loan.
With the options for both partial and full prepayments, HDFC Bank customers can utilise the Credit Dharma’s prepayment calculator for your HDFC Bank home loan to determine how much they could save by opting for prepayment.
Key Features of HDFC Bank Home Loan Prepayment Calculator
The HDFC Bank Home Loan Prepayment Calculator is a useful tool designed to help borrowers understand the impact of making prepayments on their home loan. Here are the key features of this calculator:
- User-friendly Interface: Features a simple layout for quick calculations.
- Personalized Inputs: Allows for the input of specific home loan details for customised savings estimates.
- Flexible Options: Enables modifications to loan amount, tenure, and interest rate to align with specific loan terms.
- Detailed Output: Provides a detailed breakdown of regular EMIs, paid and pending EMIs, and interest savings based on the prepayment amount.
How Credit Dharma’s Home Loan Prepayment Calculator Works
Let’s illustrate the use of this calculator with an example.
Scenario:
A borrower has taken a home loan of Rs. 1 Crore at an interest rate of 9% per annum for a 20-year tenure. After paying 12 EMIs, the borrower decides to make a prepayment of Rs. 2 Lakh.
Calculator Input:
| Loan Details | Value |
|---|---|
| Loan Amount | Rs. 1 Crore |
| Tenure | 20 years |
| Interest Rate | 9% p.a. |
| Instalments Passed | 12 |
| Prepayment Amount | Rs.2 Lakh |
Calculator Output:
| Calculation Result | Value |
|---|---|
| Total Interest Saved On Loan | Rs.8,47,731 |
| EMI Tenure is Reduced By | 12 months |
Factors to Consider Before Prepaying a Home Loan
While prepaying home loans seems lucrative, borrowers must evaluate certain aspects beforehand:
Benefits of Prepaying Your Housing Loans
Prepaying home loans using surplus funds carries multiple benefits:
- Lower interest outflow: Prepaying loans cuts down interest costs as outstanding principal declines faster.
- Shorter tenure: With every prepayment, loan tenure reduces, enabling faster debt freedom.
- Lower EMIs: Alternatively, borrowers can also opt to reduce EMIs while keeping tenure constant.
- Savings on total costs: Overall savings on a home loan can amount to several lakhs of rupees depending on the loan amount and tenure.
Understanding Prepayment Charges on HDFC Home Loans
HDFC Home Loans may include prepayment charges under certain conditions, as per RBI guidelines. These conditions are outlined below to ensure clarity and fairness in applying these charges:
- Non-Individual Borrowers:
- Who it Affects: This applies to entities that are not individual persons, such as companies or partnerships.
- Charge Applicability: Banks and Housing Finance Companies (HFCs) can charge a prepayment penalty on loans given to these non-individual borrowers.
- Fixed-Rate Loans:
- Scope of Rule: Prepayment penalties are permissible on all fixed-rate loans.
- Affected Parties: This rule affects both individual and non-individual borrowers, irrespective of their borrower status.
- Switching Lenders:
- Scenario: Occurs when a borrower with a fixed-rate loan opts to refinance the loan through a different bank or HFC.
- Penalty Justification: The original lender is allowed to impose a prepayment penalty to offset potential losses from the early loan closure.
Is Overdraft a Better Option than Prepayment for You?
What is an Overdraft?
An overdraft facility on a home loan account allows depositing surplus funds, which reduces the outstanding principal and the interest charged. This facility is beneficial because it provides liquidity—surplus funds can be withdrawn at any time.
While it helps save on interest costs, it’s important to note that overdraft facilities might come with higher interest rates and additional fees compared to standard loans.
Prepayment vs Overdraft: What Should You Opt For?
| Option | Features | Benefits | Good For |
|---|---|---|---|
| Prepayment | Directly reduces principal Saves on interest Potentially shortens loan tenure | Long-term interest savings Accelerates debt freedom | Borrowers seeking long-term savings and early debt clearance |
| Overdraft | Allows deposit and withdrawal of surplus funds Interest calculated on reduced principal | Flexibility in fund access Saves interest while funds are deposited | Borrowers needing liquidity and flexibility with continued savings |
Considerations
- Financial Stability: Overdraft might be more suitable if you expect fluctuating income or expenses.
- Interest Rates: Compare the potential interest savings against the higher costs associated with an overdraft facility.
- Financial Goals: Prepayment might be better if your goal is to reduce debt quickly.
Let’s slash your home loan’s tenure together!
Conclusion
Prepaying home loans substantially reduces interest costs over long tenures. HDFC Bank offers exceptional prepayment options for borrowers to determine potential savings on their housing loans. After considering key aspects, homeowners can decide on suitable prepayment amounts and strategies to optimize savings.
Looking for expert guidance on your home loan journey? Choose Credit Dharma for all your home loan needs, from application to repayment. We’re here to assist you in making informed decisions, optimizing prepayment amounts, and strategizing for maximum savings. Utilise our tools and expertise to expedite your path to financial freedom.
Frequently Asked Questions
Prepayment can lead to a reduction in the loan tenure and/or EMIs, depending on the option the borrower chooses. By reducing the principal amount, the interest component decreases, allowing for these adjustments.
Prepaying a home loan can reduce liquidity, incur opportunity costs from foregone investment returns, lead to prepayment penalties, potentially affect your credit score, decrease tax benefits, and reduce financial leverage, so it’s crucial to weigh these risks against the benefits.
Yes, you can make prepayments on your home loan every month, provided your lender allows frequent prepayments without penalties.
Deciding between prepayment or continuing with a home loan depends on your financial situation. Prepayment can save on interest costs but may deplete your cash reserves. Consider your financial goals and consult with a financial advisor to make an informed decision.
For floating rate home loans, most banks, including HDFC, do not charge a prepayment penalty. However, fixed-rate loans may incur charges, especially if the prepayment is significant.
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