In October 2020, a
surge in the demand for home loans created a condition for competitive interest
rates. Several reports on this situation showed that the affordable interest
narrowed down to nearly 80 basis points of the Government bonds. This demand
has been generated due to work from home (WFH) requirements, a decrease in
stamp duty, discounts offered by builders, etc.
It is often seen that
during the repayment of such credits, individuals often restrain from planning
other financial advances. This can be because of the housing loan interest
rate, which adds another financial obligation to one’s existing liabilities.
This situation can be made favorable by following some simple tricks for
reducing housing loan interest.
Ways to reduce the home loan interest rate
- Choose the tenure
carefully
Home loans usually offer
repayment terms stretching as long as 20 years. Therefore, an individual must
choose an option which will help him/her to reduce the loan interest rate. It
is smarter to select a short tenure as it will help in paying the outstanding
balance without levying a heavy interest burden. Though choosing a longer tenure
lowers the EMI but it increases the interest rate consecutively.
One can learn more about
the tenure and home loan interest rate and chalk out your finances accordingly.
- Make a budget for
prepayment
It is suggested that every
borrower should have a plan for prepayment or foreclosure. One can prepay the
loan amount using salary increment, bonus and other allowances.
Many lenders offer part
prepayment facilities without charging any extra fee. Prepayment also helps in
reduction of the principal sum, lessening the outstanding housing loan
interest.
Eligible borrowers can
also benefit from pre-approved offers to enjoy a hassle-free loan process.
These offers are available on financial products like business loans, personal
loans, credit cards, etc.
Check your pre-approved
offer by providing the necessary details like your name and phone number.
- Go for a home loan
balance transfer
Housing loan
interest rate may change with revision in the repo rate. Existing home loan customers
can look for financial institutions offering attractive interest rates and can
shift the outstanding amount to the new lender to avail lower rates. Refinancing
the loan can help save money during the repayment tenure.
- Modify EMI payout
Most lenders allow
borrowers to revise the EMI payouts annually. It means borrowers can make use
of their salary hike to increase EMI amount, thus reducing the tenure. So,
before availing a housing loan, it is better to calculate how much EMI one can
afford with the help of an online EMI calculator.
- Improving credit
rating and score
A borrower must hold a
high credit score that makes their loan application procedure hassle-free and
swift. A lending institution asks for a credit score of 750, or higher. If an
applicant has a poor credit history, they must check the ways to improve their
CIBIL score for home loans. This will also help them in maximising the
creditworthiness and lower loan interest.
- Compare
lending institutions
One of the easiest ways to
reduce home loan interest rate is by comparing different lending institutions
to find who is offering the lowest rates. Individuals can review the benefits
and terms of service that accompany the loan option and choose a lender offering
low housing loan interest rate.
Many NBFCs also offer
lower interest rates to their existing customers who maintain a solid credit
history. Therefore, researching well on the features and repayment options will
help a borrower save more.
Leave a Comment