For many Filipinos, purchasing a home is a significant life milestone. This is usually made possible through the help of housing loans that are offered by banks or other lenders like government agencies. With that being said, a housing loan is a huge and long-term financial responsibility. It can take years to pay off the loan and thus requires a high degree of commitment in order to pay it within the agreed-upon terms.
Fortunately, there are many strategies that you can follow to help you pay off your housing loan faster and accelerate your journey toward homeownership and financial freedom. Here are some practical tips to get you started:
Increase Your Monthly Payments or Pay More Frequently
Most housing loans will have fixed monthly payment amounts and loan terms. For example, a bank may require you to pay PHP 25,000 per month for 5 years. However, this doesn’t mean that you can only make payments once a month or follow the specified amount. Depending on the lender, you may make additional payments each month or pay more than the specified amortization. Then, they will reevaluate your loan at the end of the year and give you a new amount for your monthly payments.
Some ways you can achieve this goal include using unexpected income, such as tax refunds or cash bonuses from work, to make a lump sum payment to reduce the principal loan amount. You can also trim your discretionary expenses and direct the funds towards your housing loan instead.
You can also use a credit card Philippines-based banks issued to you to make larger and more frequent payments. Do note, however, that not all lenders will allow you to pay your loan amortization using a credit card. If you are allowed and you have a sufficient credit limit, you may be able to use your card to pay bigger amounts more often.
Doing this may seem like taking on a larger expense at first, but if you’re able to pay off your housing loan faster, you can save on interest and also reallocate your loan payments for other expenses.
Choose Shorter Payment Terms
Depending on the lender, your housing loan may have a payment term of 5, 10, or even up to 20 years. If you take out a loan from Pag-IBIG, the maximum loan term is even longer—up to a maximum of 30 years.
If you want more manageable monthly amortizations, you can opt for the longer payment terms. However, this also means having to allocate money for housing loan payments for longer. In addition, longer payment terms usually also mean higher interest rates. On the other hand, shorter payment terms usually mean paying higher loan amortizations but lower interest. This can save you a significant amount when you compute the total.
Of course, before availing yourself of the shorter payment terms, evaluate your financial capacity first to ensure that you can meet the higher monthly payments.
Consider Balance Transfers
Sometimes, there are banks and lenders who may offer balance transfers or similar products to existing or potential clients. This can be a viable option to save on interest payments and pay off your housing loan faster. However, make sure to understand all the details. For example, balance transfers usually have associated fees in order to process the transaction.
You may also have to wait for a few days before the balance transfer gets approved. If the dates of the balance transfer approval and of your previous amortization overlap, you have to pay the original loan first. Take these factors into account before you decide on a balance transfer for your housing loan.
Avail of Promotional Bank Offers
In order to entice new customers and encourage loyalty for existing clients, banks usually come up with promos and other special product offerings that can help you save money. Aside from balance transfers, you may also be able to use cashback rewards for early payments, fee waivers, interest rate discounts, and more. Study these promotions and see which ones can help you accelerate your housing loan repayments.
Look for Lenders or Banks with Low Interest Rates
Last but certainly not least, another way to pay off your housing loan faster is to look for lenders with low interest rates in the first place. Before you take out a loan, study the current market and see which institutions offer the most competitive rates. You should also take a look at other factors, such as loan terms, the reputation of the lender, and the kind of customer service they provide. It’s also a good idea to consult with your friends or loved ones who have previously gotten a housing loan and to ask for their recommendations.
Keep in mind that this process can take a lot of time and effort. However, once you find an ideal lender that aligns with your financial goals, it will be easier for you to pay off your loan sooner.
If you want to pay off your housing loan faster, you need a lot of careful planning, financial discipline, and the right strategies. By implementing these tips, you can expedite your journey toward being debt-free and fully owning your home.
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