Home loans: Use annual bonus to reduce interest outgo

Avoid pre-payment if you have only a few years left or have a fixed-rate loan

Adhil Shetty
Last Updated at April 24, 2017 13:23 IST

home, loan, home loan, interest, property, luxury homes, real estate

Photo: Shutterstock

It is that part of the year when salaried employees receive their annual bonus. After a year’s hard work, people eagerly look forward to this windfall, which they often wish to spend on things they have desired for long, such as a vacation or a consumer durable. While it is alright to use a part of the bonus for fulfiling one’s long-held aspirations, the entire amount should not be squandered on such things. A substantial part of the bonus should be allocated towards taking care of pressing financial concerns. One long-term liability that many families have is a home loan. A part of the bonus should go towards reducing this liability. However, you need to weigh the pros and cons of the decision carefully. While in some situations it is a good idea to pre-pay the home loan, in others it is not, as we shall see.

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