Tips to Reduce your Home Loan Interest Rate: As per reports, the Indian home loan market is expected to grow at a CAGR of approximately 22% between 2021 and 2026. As demand for such loans continues to rise, consumers need to ensure awareness about these credits’ various factors. For example, assessing the intricacies regarding home loan interest rates can help plan repayment efficiently.
Due to the longer tenor of such loans, even a minor difference in rates can mean substantial interest savings for borrowers. Hence, to facilitate easy repayment, individuals try to reduce their home loan interest rate burden using a few simple tips.
Best Ways to Reduce The Home Loan Interest Rate
Here are some effective ways of reducing the burden of home loan EMIs:
Opt For a Shorter Loan Tenor
The principal amount is paid off much faster if the loan tenor is shorter. Moreover, individuals have to pay significantly lower interests if they choose a shorter loan tenor. One must understand that a longer repayment term ensures limited interest cost rather than significantly lowering interest rates.
Nevertheless, it is also essential to keep in mind that opting for a shorter loan tenor will increase the EMI payable. Hence, it is imperative that individuals assess the affordability before deciding on the EMI amount. One can also use a home loan EMI calculator to assess the effect of tenor on the interest amount and monthly EMIs.
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Make Prepayments Whenever Possible
Making prepayments from time to time can bring down the overall interest payable on a home loan by reducing the outstanding principal sum. Hence, individuals should always try to pay more than the usual EMI amount. Borrowers have an option to prepay the outstanding balance of the loan amount either partly or fully.
Besides reducing the outstanding principal amount, paying the additional amount will also significantly reduce EMIs due, even though the loan interest rate remains unchanged.
Previously, financial institutions used to impose additional charges for prepayment. However, today, prepayment does not result in additional expenses. Hence, this has become a popular method of reducing loan tenor and the interest cost. Borrowers can now opt to pay an extra EMI every year, which allows one to save on their home loan interest rate.
Keep an Eye Out for Lower Interest Rate Offers
Individuals who have already availed of a loan must not stop searching for the lowest interest rates on a home loan. Keep a lookout for financial institutions that might be willing to offer home loans at a lower interest rate than the present lender. Moreover, it is essential that one takes into account the charges that might be involved in relation to refinancing. Before opting for a switch, make sure to know the steps to apply for a home loan balance transfer.
Moreover, reputed financial institutions also provide pre-approved offers to their existing customers to simplify the application procedure of availing financial assistance. These offers are made available on an extensive range of financial products, such as a home loan and a loan against property. Check your pre-approved offer now by entering a few basic details.
Increase EMI Every Year
Salaried employees often acquire increments every year. However, the EMI that has been agreed upon with a financial institution stays the same. Hence, individuals who enjoy an increase in pay every year must make sure to increase their EMIs annually. This will help them to repay their home loan faster, in turn, lowering interest expenses.
Besides applying the techniques mentioned above, borrowers must compare the home loan interest rate of different financial institutions and opt for the one that suits their repayment capacity.