Repaying your home loan debt is an extremely lengthy procedure that usually takes up to 30 years to pay off thoroughly. In case you have no prior planning, the home loan EMIs may put adverse stress upon your monthly budget for long repayment terms. Note that, no matter whether you are looking to avail a Home loan in Pune or Home loan in Mumbai or a home loan in any other city, your EMI on a home loan is based on major 3 parameters – interest rate, principal constituent, and loan repayment tenure. You must find the correct balance among all parameters i.e., the loan proceeds, repayment tenure and rate of interest to repay your debt on a home loan comfortably.
In case you are looking to place an application for a home loan, factor in these seven crucial tips to lower your interest payable on your home loan –
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Keep your loan repayment tenure short
As stated above, home loan repayment is one of the 3 fundamental parameters that decide how much interest you would be able to meet on your loan proceeds. Mostly, just like others, you may tend to avail a home loan for longer repayment tenure to lower the monthly loan EMI payable, however, over the long term, you may end up repaying more as an interest constituent. To get an idea of the appropriate loan repayment tenure that would suit you, ensure to use an online home loan EMI calculator to see on your own how the rate of interest may impact the thorough interest payable on your overall borrowed amount. So, before you place an application for a home loan, ensure to choose the repayment tenure carefully so that you do not end up paying a higher interest constituent against your principal constituent.
Part-pay or prepay your loans whenever you can
Mostly, NBFCs and banks do not levy prepayment or any loan foreclosure fee on floating rate of interest home loans. So, if your home loan is based on a floating rate of interest, you must try and make prepayments whenever possible. During the initial few years, the bigger part of your home loan EMI is headed towards interest repayment while the remaining is used for making the payment for your principal constituent. Making constant prepayments can considerably lower the principal constituent and thus the overall interest payable would even fall. However, few lenders might levy a prepayment charge on a fixed rate of interest home loan prepayment. Thus, you are recommended to check with your financial institution lender to know more regarding the prepayment fees before you avail a loan.
Compare the home loan rate of interest
It is extremely necessary for you to compare distinct kinds of home loan rates of interest offers and conduct proper research on the home loan products before zeroing on the preferred lender. You can compare the home loan rate of interest on distinct 3rd party sites or approaches the official site of the lender for details on rates and other fees and charges incurred by distinct lenders. By comparing the home loan rate of interest offered by distinct lenders, you can avail a better deal on home loan rates and save a massive amount on the interest amount payable.
Home loan transfer option for a lower rate of interest
Few of the lenders provide a loan balance transfer option to you if you have already availed a home loan and have begun making the prepayments against it. If a rate of interest levied by your present lender or bank is higher than the interest rate provided by another lender or bank, you can transfer the rest of the principal constituent to another lender or bank to reduce your rate of interest. However, it includes transfer fees, and you even require getting clearance from your present lender to transfer the rest of the loan outstanding balance to another bank lender.
Pay more in the form of a down payment
Most housing finance companies and banks provide a home loan of as high as 75 per cent – 90 per cent of overall property value and the remaining 10 per cent – 25 per cent you must fund from your pocket. In case you have surplus funds, it is better to make a bigscale down payment. The higher you make a payment as a down payment, the lower would be the principal loan proceeds, which directly lowers the overall interest constituent to repay the home loan debt.
Maintain a strong credit score
Most lenders prefer providing loans to you if you have a strong credit score to ensure the loan proceeds can be better recovered within time. In case you hold a strong score of 750 and above, there are considerably higher chances that lenders or banks might provide you with a preferential rate of interest on home loans. If your credit history is not on the good end, then you might require negotiating with the preferred home loan lender provided you have a great relationship with this lender. Also, you can close a close watch on the festive offers wherein lenders tend to offer a lower rate of interest to attract or entice a higher number of customers.
Enhance your loan EMI
If you have availed a home loan from a lender who permits you to revise your loan instalment annually, then you must go for a higher EMI if your income enhances. Increasing your home loan EMI will lower the loan tenure and thus the interest payable against the home loan will even substantially come down. However, you require checking with your lender if they offer such a kind of facility.
To conclude
Besides the above-listed points, it is necessary to ensure that you go through the terms of the loan offered by the lender and even hold details on all other important fees or charges before you sign up for a home loan deal. Now that you are aware of all the possible available options to lower your home loan interest constituent burden, ensure to use the online home loan calculator to find out the best available home loan deal for yourself.