To tackle soaring rates go for prepayment

Sometime back the hike in the property rates was the primary concern for the buyers but now the soaring interest rate on the home loans also is not leaving any stone unturned to exploit the home loan borrower. The people that were planning to borrow home loan have a option of wait and watch but what can a present borrower do, except shelling out his hard earned money.

For the borrowers that are devastated by the soaring interest rates, prepayment can be a very good option. Depending on his capacity and the resources available a borrower can either prepay the whole loan amount or he can for partial prepayments.

While doing that a few things are to be kept in mind that when a borrower prepays his loan, the lenders levy prepayment penalty on his that is decided in accordance to the loan amount and loan tenure remaining and it can also vary from bank to bank; generally it is high for private sector lenders but if a borrower is making partial prepayments then the lenders do not charge anything.

But if a borrower is prepaying by his own resources and is not borrowing any money from any other lender to prepay the loan borrowed from the present lender then also lenders can not charge anything extra from the borrower.

Is a person wants to prepay his loan and does not have any extra source of income then he can make use of recurring deposit scheme. At present a person can earn around 6 percent from this scheme, by the time a borrower has accumulated a considerable amount of money he can utilize that for prepaying his loan.

Due to the prepayment the principal amount will decrease considerably and hence the amount interest will be charged will decrease resulting in decrease in the amount of EMI to be paid.