Getting a home loan is a huge long-term financial decision that can last decades. Once you make your first EMI payment, it is simple to fall into the habit and overlook that you possess a very important financial document: your home loan statement. You should view it not only as a receipt, but as the report card for your biggest financial responsibility. Reviewing this document regularly is important for keeping yourself financially secure and at peace.

So, why spend time looking at your statement?

1. The Important Tax Benefit

The first among the most important reasons to look at your home loan statement is tax planning. Under Indian taxation laws, you are eligible to claim considerable tax deductions on both the interest and principal elements of your loan. Your annual or provisional statement clearly distinguishes between the total interest paid and the total principal repaid during the financial year. Unless you include these details in your tax returns, you will lose good deductions and pay more tax than you should.

2. Identifying Errors and Discrepancies

Human error is inevitable, even with computerised systems. You must ensure that each EMI you have paid has been correctly credited. Verify the debited amount and payment dates against your transaction history in the statement to see that your outstanding principal balance indicates your payment properly. If you had made any prepayments or part payments, verify that the statement reflects the corresponding decrease in your principal, which should reduce your interest outgo or shorten your loan term. If you notice any errors, let your lender know immediately. For instance, PNB Housing Finance offers multiple easy ways for you to reach out to their team and get your queries resolved quickly. This is also why, choosing a good financial institution is important.  A minor, forgotten mistake can escalate to be a serious problem if overlooked.

3. Breakdown of Principal vs Interest

Particularly in the early years of a long-term loan, a significantly larger component of your EMI is interest, with a relatively small amount going towards reducing the principal. Your home loan statement offers an explicit, regular breakdown of this division. Knowing where your money is going allows you to view your repayment stages and encourages you to make savvy part-prepayments. Having clear knowledge of exactly how much principal remains provides you with an accurate vision of your outstanding debt and assists in handling your personal net worth calculations.

4. Avoiding Hidden or Unforeseen Charges

What are you not seeing? The ‘Fees and Charges’ section tends to be the most neglected area of the document. It is here that your lender will specify any late payment fees, a processing fee for a certain service, or other miscellaneous costs. Making it a point to monitor this section keeps you aware of whether you’ve accidentally run up penalties, possibly due to an outstanding direct debit or a delayed payment. If a charge seems to have been inappropriately imposed, you can object at the time instead of finding out years afterwards, when the sum is far more difficult to contest.

5. Dealing with Interest Rate Movements (For Floating Loans)

Where you have a floating rate, the rate will vary depending on your lender’s benchmark and on market conditions. Your home loan statement will usually inform you of any change in interest rates and the date from which they have been effective. This is essential for planning finances. A rate change will increase or decrease the interest part of your EMI, normally resulting in a change in your overall loan tenure. By monitoring these fluctuations with your home loan statement, you can determine if it’s time to explore a balance transfer or additional payments to counteract a rising rate.

In summary, a home loan is a huge financial undertaking, and keeping track of its information is essential. It’s a good idea to develop the habit of regularly checking your loan statement, as it gives you the power to double-check for accuracy, maximize your tax savings, and remain fully in charge of your homeownership experience.