First-time housing loan borrowers might find it difficult to repay their loans because of financial burden. The equated monthly instalments (EMI) can weigh down on their monthly budget for a substantial period. Therefore, one can follow some tips to effectively lower home loan rates.
By following these pointers, borrowers can easily plan their EMI outgo and leave room for savings. Contrarily, poor planning can make an individual pay more against a home loan.
So, it is practical to factor in the tips mentioned below for a seamless experience throughout the loan’s tenor.
Top tips to reduce home loan rates
Borrowers must ensure that their EMIs on a housing loan does not eat into their monthly savings. As several lending institutions offer loans at different interest rates, one should choose competitive interest rates. To do so, potential borrowers require proper research.
Other than this, they can also consider following a few tips such as:
Opting for a shorter loan tenor
Although a longer repayment tenor can decrease an individual’s EMI burden, it increases the overall interest. Hence, one should preferably choose a shorter tenor and reduce the home loan rates payable. To make a choice conveniently, borrowers must use a housing loan EMI calculator and adjust the tenor to arrive at the maximum EMI one can bear. This way, individuals can pay these EMIs without any hassle.
Prepaying the loan amount
Another top tip to reduce your home loan interest is regularly prepaying the loan amount. Inexperienced borrowers should note that their housing loan EMI consists of two parts. They are:
- The interest charged on the borrowed sum
- The principal
During the initial loan repayment phase, borrowers pay more towards the levied interest than the principal. Thus, it is helpful to make part prepayments during the early days of the loan when an individual’s salary is more, and he or she receives more work bonus.
In this aspect, reputed insurers give an option to make prepayments without any charges. They also provide a substantial loan amount and pre-approved offers for a hassle-free home loan process.
Financial institutions extend pre-approved offers to customers on various products, including home loan and loan against property. These offers speed up the loan application process. Borrowers can check their pre-approved offers by submitting basic details like name and phone number.
Further, prepaying a housing loan enables borrowers to pay off the loan within a shorter span, much before their original repayment tenor.
Going for a home loan balance transfer
To lower home loan rates, one can change his or her existing lender and transfer the housing loan balance. Going for this procedure is convenient and helps an individual to save interest.
However, one should ensure to not miss out on any payments concerning a balance transfer-based home loan as it can result in exorbitant penalties.
Revising EMI payouts every year
Some lenders allow potential borrowers to revise their EMI payouts every year. This allows them to adjust their EMI concerning their current financial condition. For instance, in the case of salary hikes or bonuses, one can opt for paying more EMI, which decreases the loan tenor.
Other than this, potential buyers who plan on obtaining a housing loan can follow a guide to get a better home loan interest rate. Under this guide, one will find vital pointers to follow. They are:
- Borrowers must consider improving their CIBIL score to get lower home loan rates. Essentially, there are three ways in which one can improve this score: clearing debts, paying credit card balances, and rectifying errors on a credit report.
- One should note that lenders calculate the loan’s principal amount in addition to interest rates. So, borrowers can make a higher down payment and lower the principal amount. This will subsequently decrease the interest rates and EMI payable.
- Applicants can negotiate with their lenders and obtain a housing loan at competitive interest rates. The negotiation process gets easier if they make repayments on time.
- Finally, lending institutions offer attractive deals on home loan rates to those individuals who maintain employment stability. Steady employment indicates a borrower’s financial strength which is a deciding factor in the housing loan eligibility process.
To conclude, this financing solution is in demand among Indian home buyers as it makes substantial funds available for easy home financing. However, first-time buyers should consider following the aforementioned tips and decreasing their home loan rates to curtail EMI burden.