Home loan is a facility that has been offered by banks, Non-Banking financial companies, financial institutions, lenders etc. in order to support people’s dream of purchasing and living in their own houses. The home loan is offered usually for the longer period and with a larger amount. Repayment of the loan amount becomes a huge burden for the people as it often hampers their monthly budget. Here, Finance Buddha, has come up with certain tips that will help you to reduce your home loan interest rates.
- Try to choose short loan tenure:-
The short duration of the loan always ensures the faster repayment of the complete loan and that will also lead to the lower rate of interest. The longer tenure of the loan leads to the increment in absolute pay out of the interest. Customers and borrowers often tend to ignore the fact. When the tenure of the loan is getting reduced, the payment of the principal amount becomes faster. The interest is always calculated on the outstanding principal amount of loan. Hence, the quick repayment of the principal loan amount leads to lower the absolute pay out of interest.
- Home Loan Balance Transfer:-
Home loan balance transfer is one of the most important and effective tool that is being used by the home loan borrower these days. There are many lenders in the market that are offering low interest home loans In order to attract the borrowers. The borrower can conduct the cost and benefit analysis and chose another lender that offers to transfer the home loan at lowest home loan rates. If not completely lowest home loan rates, then at least comparatively lower interest rates can lead to save a lot of cost for the customer. However, before opting for the home loan balance transfer, the customer should consider certain things. For example, if the customer is in the early stage of the repayment of loan, then it is advisable for him or her to opt for the home loan balance transfer. But, at the same time, if the customer is not in the early stage and only a few years are left for the repayment of the loan, then it is not advisable for the customer to opt for the home loan balance transfer. Also, if the outstanding amount of the home loan is less, then customer should not switch the lender.
- Quick repayment of the principal amount:-
As stated above, the home loan interest rates are always dependent on the outstanding principal amount. Hence, the borrower should majorly focus on the quick repayment of the principal amount of the home loan as it will steadily lead to lower the interest rates for the home loan. The lesser will be the principal amount, the lesser shall be the interest rate that has to be repaid.
- Focus on paying regular EMIs:-
The customer should always focus on paying off the monthly instalments regularly in order to reduce the home loan burden as well as the interest rate burden of the housing loan. If possible, the customer should also try to pay off more amount than the regular monthly instalments. The same shall be helpful in reducing your principal outstanding and the same shall lead to reduce the interest rate of the home loan. Technically speaking, every year a borrower can pay one more EMI than the usual number of instalments or EMIs. This is a very effective trick to reduce the home loan tenure and this shall result in decrease interest cost.
Borrower can also focus on increasing the instalment amount by 5% every year. That can result in making the wise choice to reduce the interest rate burden. The customer can appropriately make the decision with aligning it to the increment in your salary or with the annual bonus. You can even go ahead in combining the options that is to increase the 5% instalment amount and paying one additional EMI. These choices will be significantly helpful to reduce the interest rates. The customer can use the EMI calculator in order to plan such financial activities.
- Focus on prepayment of the home loan:-
The customer can check the prepayment policy of the home loan lender. If there are no penalties associated with it, after certain time period the person can focus on the faster prepayment of the home loan. The faster prepayment of the home loan can lead to lower the interest rates.