Home loans. Hearing this word brings a lot of thoughts in our minds, more so if you are already an existing borrower whose dream of living in your own house became a reality with Aditya Birla Capital Home Loan. While it’s true that home loan EMIs occupy a high portion of your income every month because of their big-ticket loan size itself, that loan realizes a big dream as well.
But during the long tenure of home loan repayment, which goes on for as high as 20-30 years, we often have to take other loans like car loans or personal loans whenever the need arises. Hence we end up managing multiple debts simultaneously.
For such scenarios, here are tips for managing them along with repayment of your Aditya Birla home loan.
-Opt for debt consolidation by applying for a fresh loan at a lower interest rate
Borrowers having outstanding debt in the form of multiple loans and outstanding credit dues can streamline their finances by opting for debt consolidation, wherein they can avail a fresh loan at lower interest rates, thereby also doing away with the need to repay multiple EMIs.
For instance, if you are already repaying a loan at a low Aditya Birla home loan interest rate
, you can benefit from the facility of taking a top-up loan on your housing loan and utilize it to prepay other loans as well. This way, you would only be repaying home loans and top-up loans rather than multiple high cost and expensive loans.
For those who are not servicing Aditya Birla home loan and that is why they cannot avail a top-up, they can consider availing personal loan for a tenure anywhere between 1-5 years, as it involves quick disbursal without any restriction on end usage of the fund, and its interest rates are lower than credit card finance charges (up to 47-48% p.a.).
Also, those looking for a longer repayment period and lower interest rate can opt for secured loans like loan against property, as it involves tenure of 15-20 years.
-Convert your entire outstanding dues into EMIs
Those with large credit card dues can convert their outstanding dues into EMIs.
While the finance charges on outstanding balances can go as high as 47-48% p.a., interest rates on converting your entire dues into EMIs are much lower, generally ranging between 12%-24% p.a., with tenures extending up to 5 years.
Card issuers also allow cardholders to convert specific transactions beyond a threshold limit into EMIs, with lower interest rates of usually 12-15% p.a. and tenure of 3 months to 48 months,
But what about those who want credit when repaying the home loan?
For those who wish to apply for a credit card while repaying multiple loans like Aditya Birla home loan and others, here are some tips.
-Never commit the blunder of not repaying your total credit card bills
Lenders mostly wish to prefer lending to consumers who follow a consistently disciplined behaviour towards both loans as well as credit card repayment. Even credit bureaus to are widely thought to be giving maximum weightage to your past loan and credit card repayment history while finalizing your credit score. And no matter at what Aditya Birla home loan interest rate.
You are serving the existing home loan, whether a low or high rate. It is equally important to repay the EMIs timely without fail.
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Moreover, failure to pay your credit card bill timely and in full is capable of burning a hole in your pocket, as the finance charges can go as high as 47-48% p.a., and late payment fee goes up to Rs 1,000. Therefore, to avoid incurring these charges, regularly pay your credit card bills in full and on time. Doing so would also help in building and maintaining a strong credit score.
-Avoid overspending and ensure you are maintaining a credit utilization ratio below 30%
Credit utilization ratio (CUR) is the portion of the total credit card limit utilized by credit card holders through transactions. Having a high CUR depicts you as a credit hungry consumer in the eyes of lenders, resulting in credit bureaus pulling down your credit score upon breaching this mark if you tend to frequently spend more than 30% of your credit card limit, either request your card issuer to increase your credit limit or you can get an additional credit card, to bring down your CUR.
-Never make it a habit to pay minimum dues
Instead of rolling over your dues every month, consider converting your entire outstanding credit card balance or big-ticket transaction into EMIs to avoid approaching a debt trap. The interest rate on EMI conversion (up to 12%-15% p.a.) is much lower than the finance charges (up to 47-48% p.a.) levied on outstanding dues.
Also, you can consider credit card balance transfer to another credit card from another bank at a lower or nil interest rate for a pre-specified period. Such periods are popularly known as promotional interest periods of 1-6 months, post which the regular interest rate kicks in.
How to avoid loan debt trap?
The best way here to avoid a debt trap is to avail a credit facility only if you can conveniently repay it without straining your financial health, especially if you are already paying a high Aditya Birla home loan interest rate. Once you avail of a credit facility, whether it’s a credit or loan, ensure to make regular repayments to avoid debt accumulation through penal interest and charges.
Avoid these mistakes to maintain healthy finances when repaying loans:
-Not factoring in your repayment capacity while zeroing in on a repayment tenure– Borrowers whose repayment capacity is low, i.e. their FOIR is above 50-60%, can consider opting for a longer repayment tenure, as it implies smaller EMIs.
However, since a longer tenure would also imply higher overall interest outgo, consider prepayment of your loan whenever you have surplus funds.
Whereas, for those who have a lower FOIR, implying higher repayment capacity, they should opt for the tenure whose corresponding EMI they are comfortable repaying without breaching the FOIR above the level of 50-60%.
-Failing to include at least 6 months’ EMI in an emergency fund- Borrowers should also include the EMIs of at least 6 months in their emergency fund. This will allow them to make repayments during periods of income loss due to unforeseen financial exigencies for instance sudden job loss or severe illness.
-Delaying or missing EMIs-Once your loan is sanctioned, no matter if it is high or low Aditya Birla home loan interest rate, make sure you pay the EMIs timely, as this practice boosts your credit score & reflects favourably on your credit report too.