Considering repaying home loan with EPF savings? Here's what you need to know

livemint.com:

home loan interest rates by 10-15 basis points in March 2024, resulting in rates ranging from 8.70% to 9.80%. Regardless of the reasons behind these banks’ decision to raise their interest rates, borrowers ultimately face increased expenses as they must allocate more funds towards equated monthly installments (EMIs) or opt for extended loan tenures. Numerous borrowers, eager to clear their debts swiftly, turned to using their savings or investments, such as their Employees’ Provident Fund (EPF) accounts, to repay high-interest loans promptly.

However, the growing trend of using the EPF corpus for loan settlement has raised concerns about balancing loan repayment needs with safeguarding retirement funds. Deciding to withdraw from your EPF for home loan repayment is a major step that demands thoughtful deliberation. This is because EPF savings grow with interest and constitute a vital portion of your retirement savings.

Withdrawing these funds diminishes the total amount, possibly resulting in reduced retirement benefits. Financial experts also suggest exploring alternatives like debt consolidation or balance transfer to secure a lower interest rate on home loans, potentially easing repayment without tapping into EPF savings. Whether you should opt for EPF withdrawal to repay your loan depends on various factors such as the urgency of the loan repayment, the amount needed, and your overall financial situation.