Have multiple loans? Here are reasons why you should settle the home loan last

Got stuck in multiple loans?  Know why you should settle the home loan at last.


Most families simultaneously pay EMIs for multiple loans including home loans, vehicle loans, credit card bills, or personal loans. From a safer perspective, It is best to take loans in keeping with your money flow and other expenditures. Before making multiple loan commitments, ensure whether you can do continuous loan repayment without any financial constraints because there is the possibility of getting into an uncertain situation like unemployment, medical issues, or a salary cut. In such cases, you find it difficult to repay the existing multiple loans, so it’s better to repay some of the loans to lessen the debt burden. Out of multiple loans, you may try to repay the home loan debt first as a big-ticket asset. But compensating the home loan first to lessen the loan burden may not be the right decision. Read ahead to know why you should settle the home loan at last.

Reasons why you should settle the home loan at last

  • A home loan has a Low-Interest rate

Generally, home loans have a low-interest rate. So, it’s advisable to settle the loan commitment like personal or credit card bills which have a high cost or interest rate.  The interest rates for these loans increase up to 20 percent, which is high. But some lenders offer interest rates starting from 7 percent for certain categories of the borrower. Take necessary measures to repay other loans because the amount you pay for interest may get over and above the actual principal amount. So, it is a good idea to pay off all the credit card and personal loan debts first. After clearing these two bills, move to auto loans because the interest rate is higher compared to the home loan. The current auto loan interest rate is 7-8 percent.

  • Tax benefits

The repayment of a home loan gives you a lot of tax advantages on interest and the principal at the time of repayment. Under section 80C of the income-tax act, The principal amount paid as  EMI for the year can get a deduction up to Rs 1.5 lakhs. This benefit can only be availed when the property is not sold within 5 years of ownership. According to section 24B, the interest of the EMI has a maximum deduction of Rs 2 lakhs. At this point, the loan should benefit in purchasing or constructing a house. The construction of the house must be completed within 5 years from the date of the loan taken. These advantages will aid you in the long run because a house is an appreciating asset.

  • Creation of Asset

Always remember that taking a home loan will aid you to build your dream house, which is an asset for you. By opting for other kinds of loans like consumer loans and vehicle loans, you will be owning only an asset that easily depreciates over some time. After settling the loan amount, do not fail to collect the ‘No Objection Certificate’ (NOC) from the bank. Make sure to collect all your original or pledged documents and remove the lien from the pledged vehicle or property. Check whether NOC is updated on the credit authority database. While closing the loan, you need to pay extra prepayment penalties for auto and personal loans. In the case of a home loan, you don’t need to pay any prepayment penalties. But it’s preferable to check with the lender to know whether you need to pay or not.

Here are some benefits for an individual to opting for a Home loan 

  • Home loans are available at Affordable prices for middle-income groups:

A home loan is a good option for low-income people who desire to construct their own houses. The lenders will expect a good credit score to approve a home loan. The middle-income applicant should maintain a good credit score above 750 with a stable and regular income to repay the loan debt in monthly installments.

  • The tenure of a home loan:

Generally, a home loan has an elongated tenure period ranging from 15-20 years as the borrower gets a higher loan amount. This helps to repay the loan in small and affordable EMI installments.

  • Improves Loan Eligibility:

When you settle the home loan before the due date or on a predefined tenure period, your Credit score will increase. This opens the way for you to get a home loan at affordable interest rates, Which simultaneously enhances your loan eligibility.

  • Balance Transfer option:

In the case of a home loan, you have the opportunity to transfer your home loan to a different lender who is providing a loan at a lower interest rate.

  • You can save the amount spent on Rent:

Renting a house in metro cities is quite expensive. This may put pressure on your monthly budget. So it is the best option to pay EMI to own a house.

  • Home loans have no repayment charges

Unlike other loan lenders who charge prepayment penalties on payments made towards the home loan, There is no prepayment penalty collected on floating rate home loans. So when you have extra money you can use it to make a small payment toward your home loan.


In case you got stuck in multiple loan repayments, it’s always better to settle the home loan at last because of the above-mentioned reasons.

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