Ask Us: Home loan

Yes,you can prepay in small amounts as well as lump-sum. For example,you can accumulate a portion of your savings by way of additional income or bonus etc,and prepay every quarter,reducing your principal directly

Written by Adhil Shetty | Published: February 27, 2012 2:21 am

Most home loan providers have dropped their prepayment charges. Instead of prepaying in lump-sum,is it possible to prepay in small amounts and reduce the loan tenure?

—Chini Chakraborty,Delhi

Yes,you can prepay in small amounts as well as lump-sum. For example,you can accumulate a portion of your savings by way of additional income or bonus etc,and prepay every quarter,reducing your principal directly. This in turn will result in reducing your loan tenure.

How can a balance transfer help me cope with credit card debt?

—Digambar P Negi,Pune

Interest rates on the balance amount on credit cards keep spiralling and can accumulate to unmanageable proportions if not checked in time. In case you feel a particular card is not suitable or flexible for your needs,you can opt to transfer the balance on the existing card to a new card. Usually this card will come with an introductory free interest period or a low interest period before it switches to the regular interest rates. You should make use of this time frame to repay your transferred dues in full while you enjoy a temporary relief from further interest.

I am now in the seventh year of home loan repayment with another 8 years remaining. With interest rates expecting to fall,should I consider transferring my loan to a bank that offers a lesser interest rate or should I prepay?

—Sonali Bisht,Kolkata

You are nearly half way down your loan tenure. If you take a look at your amortisation table,you will realise that you have already paid most of the interest due on your loan and a larger portion of the principal will actually need to be repaid. This is because the interest portion of your EMI will be higher during the initial years of the tenure and gradually decrease as the tenure progresses while the reverse is true for the principal. Hence it makes better sense to prepay as the amount is deducted directly from your principal.

I reside two hours away from my work place. Does location of residence has any impact on House Rent Allowance (HRA)?

—Kanika Paul,Mumbai

The place of residence is significant in HRA calculation as for a metro the tax exemption for HRA is 50 per cent of the basic salary while for a non-metro it is 40 per cent of the basic salary. This holds true especially when you work in a metro cityand reside in a non-metro city. In this case,your city of residence will be considered for calculating your HRA.dence only will be considered for calculating your HRA.

—The expert is CEO,Bankbazaar.com
For your personal finance queries please email at expressmoney@expressindia.com

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