EMI’s can become the biggest source of stress if you won’t chalk out a proper plan prior to availing a home loan. And, this could doubtlessly pave the way to more pay outs against your loan. Well, the primary determinants of EMI’s are the loan amount, interest rate on it and the loan tenure. In case you decide on a tenor up to 20 years without any proper strategy against it, repaying a home loan becomes too long. Lengthy tenure doesn’t only weigh down your monthly budget for a long span of time but also result in soaring interest rates. And that’s the main cause of your angst.
Alleviate your loan burden by understanding a few crucial tips that could reduce your home loan interest. Before that you must know the two utmost points prior to availing a home loan. First, you will have to find the right lender who is ready to offer you a loan at a lower interest rate. Secondly, be keen on ensuring that your lender gives you MCLR-linked home loan interest rates (that offer extended loan at minimum interest rates).
Besides the aforementioned, here we discuss few more tips to reduce your home loan interest rates:
- Long Tenor means more interest: Choose shorter home loan tenor, as longer tenor leads to more interest payouts. Longer tenors of about 25-30 years will weigh down the monthly budget continuously for longer and a tenor up to 15-20 years will reduce your home loan interest rate. So, on the onset, chalk out a best strategy, choose the right tenor that meets your criteria using a home loan EMI calculator prior to signing up for a home loan.
Be circumspect while picking a loan tenor in order to inhibit paying out a high interest rate against your loan.
2.Make part prepayments as far as possible: Monthly installments have two major determinants, one is the sum that has been borrowed as a home loan and another one is the principal amount. Try to make regular prepayments as during the first few years of the prepayment, you notably pay more interest in comparison to the payments that you make towards the principal amount. It seems to be a task to a common person, but it has got a plus point with it. Paying out more EMI’s pave the way to earlier exit from your loan pain and due to which you get the benefit of lowering down the interest rate on it and reduction of your principal amount.
So, increase the amount that you pay as EMI’s in the first few years in order to clear the loan at the earliest.
3.Look for better deals: On the onset, the borrower should explore varying interest rates that different banks are offering prior to signing up for a home loan. You can find dozens of third party websites online that give you a distinct view towards interest rates and charges that different lenders levy. So it is much better and imperative at the same time to first discover and compare the interest rates that different banks or lenders are offering. And, then decide which lender would be lucrative for your pocket.
Apart from the aforementioned, the borrower should be keen enough to check on the festive offers that the banks often offer during festive season.
4.Refinance your home loan: If you’re paying high interest rates for your current home loan then you do have an option of switching to another lender. Discover what other lenders are offering, and check out if that’s more affordable for you or not. It might be possible that some other bank is interested in offering you a more affordable interest rate along with several other perks. For example, Bajaj Finser offers an access to a low interest top-up loan and 3 EMI holidays.
So, you do have an option to refinance your home loan if your current running EMI’s is becoming a head-ache for you.
5. Pay high initially as downpayment: It just could not be overlooked that the maximum number of banks and finance departments finance 70% to 85% of the total value of the asset. And, so forth you are just required to pay merely 15% to 20% of the remaining amount of the asset. Rather, it’s better to pay more initially from your pocket as down payment because the more you pay in the start, the less will be your loan amount. Thereby, that reduces the amount of interest on your home loan.