Most people choose to take a loan while purchasing a new house. However, within a couple of years, they feel the need to get rid of the liabilities that a loan brings with itself. Experts believe that the ideal age for planning to foreclose or prepay a loan is in the late 30s or early 40s. This is because, at this age, one has a stable job. Now that banks have stopped charging penalties for prepayment of loans, it has become even more difficult to decide whether prepayment of the loan is a good option or not.

The first thing that home-buyers think about when they hear the word "loan" is the Estimated Monthly Instalment or the EMI. Even if a buyer is comfortable with the decided EMI and the tenure of the loan, he/she may still be disturbed by the pressure. Moreover, the longer the tenure of the loan, the more is the depreciation value. If the loan lasts for a duration of 15-20 years, one may end up paying a hefty amount on the interest alone. As an end result, they end up paying a higher overall cost (principal and interest included), then what they would get on the resale of the said property. Keeping these things in mind, it can be said that prepayment of the loan is an idea worth considering.

But, if one wants to foreclose their home loan, there are some arrangements they must make before that.

• They will need a large amount of money to foreclose the loan. The right time to foreclose the loan is only when one has some money saved in case of emergencies.
• The other thing that one may need to decide is if they want to save on the interest paid to the bank or on the tax paid to the government. Here, one must remember that home loans are eligible for certain tax benefits under Section 80C and under Section 24. But, if the total amount of interest charged is higher than the tax deduction one is eligible for, then it is more practical to save money to foreclose the loan.
• It is possible that one may have more than one loan active simultaneously. In such a case, they must consider the interest rates of all other loans (like personal loan, vehicle loan, education loan etc.) and choose to foreclose the loan with the highest interest rate.