Home loan is a TRAP! Low EMI temptation can cost…, smart repayment of Rs 50 lakh loan can save Rs…

Home loan is a TRAP: In India, owning a house means a lot. Homeownership affects several crucial things, including societal pressure, status, and even marriages. So, owning a house in India is a big deal, and that is the major reason why people take huge loans. In India, where the prices of land and apartments are surging every day, people often buy a home with a home loan, thinking it’s a smart move. But is it a smart move or a trap? An individual who takes a home loan has to pay a higher amount to banks, which includes a hefty interest. So what is the solution? Here’s how you can save up to Rs 36 lakh on a large home loan. Chartered Accountant Nitin Kaushik shared some calculations on social media, warning that a home loan can become a major financial trap.

How A Home Loan Is A Financial Trap?

Kaushik wrote that most people celebrate loan approval as free money. A loan of Rs 50 lakh at an interest rate of 8.5percent for 30 years means a total installment of Rs 1.4 crore. This loan is not a dream, but a responsibility.

According to CA Kaushik, the majority of people in India celebrate loan approval as free money. Sharing a calculation, he said a loan of Rs 50 lakh with an interest rate of 8.5 percent for 30 years means a total installment of Rs 1.4 crore.

Don’t Make These Mistakes

Mistake 1: Focusing Only On EMIs

As per the CA’s calculation, the monthly cost of a Rs 50 lakh loan for 20 years is Rs 43,400. and the total interest is 54 lakh, which is almost more than the principal amount.

If the term is extended to 30 years it reduces EMI to Rs 38,600, but the total interest increases to Rs 8.8 million. Kaushik said a person can save Rs 4,800 per month, but will end up paying Rs 34 lakh to the bank.

Mistake 2: Ignoring Floating-Rate Lending

Kaushik advises people who want to take loan to keep a close eye on their RLLR-linked (repo-linked lending rate) loans. This practice will ensure that they’re benefiting from the policy change.

Mistake 3: Misunderstanding EMI Structure

In India majority of people believe that EMIs are divided equally between principal and interest. But it is not like that, in the starting years 70-80percent of payments go toward interest.

For Example: A loan amounting to Rs 45 lakh with an interest rate of 8 percent over a period of 20 years results in a remaining balance of Rs 39 lakh after five years, with the total EMI payment being Rs 22.5 lakh.

Mistake 4: Increasing The Tenure To Reduce EMIs

Increasing the tenure can reduce the EMI but leads to a sharp increase in interest costs in the long term. The CA suggested that increasing EMI time to time while keeping the tenure unchanged will reduce the interest rate.

How To Save Lakhs Of Rupees?

CA Kaushik suggested people who are planning to take a home loan think beyond the repayment schemes. He said that the homeowners can take control by following these five steps.

One Extra EMI Payment Every Year

As per the CA, paying an extra EMI payment every year can save Rs 11.5 lakh in interest. The loan of Rs 50 lakh can be repaid in five years advance.

Step-Up Repayment

Increase the EMI by 5percent every year and your 25-year loan can be repaid in only 12 years, saving Rs 2.6 million. An annual growth rate of 10 percent can allow for the loan to be repaid within a decade, resulting in savings exceeding Rs 3.6 million.

Use Tax Benefits Sensibly

In the previous system, people taking loans were allowed to deduct maximum Rs 1.5 lakh on the principal amount under Section 80C and Rs 2 lakh on the interest under Section 24B. If there were co-borrowers, deductions could be doubled. This could lead to savings of up to Rs 7 lakh.

Get Paid Early

As per CA Kaushik, making early payments in early 5-7 years unveils most benefits.

How Will Rs 36 Lakh Be Saved?

  • Banks do not impose repayment penalties on floating-rate loans.
  • Use bonuses or tax refunds to make lump-sum loan payments.
  • It is a good practice to prepay after 10–12 years for better benefits.
  • Invest extra money in Nifty 50 or mutual funds to get 12 percent returns.
  • After full payment, banks should return property papers within 30 days.

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