Home loan is the convenient loan variant preferred by individuals planning to own a residence of their own. The affordable home loan interest rate and simple terms make it a lucrative credit form.
The All-India House Price Index increased by 2.7% in Q4 of 2020, while the repo rate remained unchanged at 4%, making most of these credit forms cheaper. Thus, it is one of the best times to avail housing loans and fulfil one’s dreams of buying a house.
However, the interest obligations on the housing loan can be concerning for certain borrowers. This issue can be managed by implementing certain tips that effectively reduce the repayment outgo.
Tips to reduce the interest amount on a housing loan
The demand for housing loans is on the rise if a recent report from RBI is any indication. This growth can be attributed to the need for a private spot among individuals to acknowledge the work from home requirements.
Since home loan rates play a vital role in determining the overall interest outgo, selecting the right lending institution would help to settle for compatible rates. Here are some tips that eligible applicants can employ for an effective result.
- Credit score
Lenders scrutinise factors like CIBIL score and credit report before levying home loan interest rates. Technically, the credit report keeps track of the borrower’s repayment structure and credibility. An individual maintaining a 750+ CIBIL score is always on the beneficiary side as it substantiates their reliability. These borrowers receive negotiation power to convince lenders to levy an affordable interest structure.
Apart from fulfilling eligibility parameters for home loans, individuals can practice checking credit scores regularly. If the scores are low, they can follow ways like clearing outstanding dues, maintaining a balance of secured and unsecured credit borrowing, and paying EMI on time.
Individuals should know that the interest rate does not change with the loan amount. Going for a high downpayment would reduce the principal requirement. Eventually, high downpayment would result in lowering of EMI outgo and overall interest payable. Individuals can use a home loan EMI calculator to streamline repayments. This will further help them to make initial savings to meet up the borrowing cost.
Selecting the right tenor is a crucial factor that affects the home loan interest rate. Ideally, choosing a short tenor would reduce the interest outgo and help maximise the savings. However, selecting this option would increase the EMI outgo significantly. Therefore, individuals should check this factor before initiating a home loan application and proceed accordingly.
Opting for prepayments also helps borrowers to reduce interest payments. However, it is smarter to make substantial prepayments during the initial years of borrowing. Usually, the borrowers have to pay more towards levied interest outgo. Individuals can utilise the surplus amount earned by salary hike, bonus, additional income, etc., towards the repayment. This would simultaneously increase the credibility and make future loan endeavours hassle-free.
- Balance transfer
Existing home loan borrowers can opt for refinancing to reduce the interest outgo. Individuals can choose the facility to find better service and substantially reduce the interest payable. This would help in reducing EMI and hence facilitates repayment.
In this regard, individuals need to follow a structured comparison. They can check third party websites to find a reliable lender levying compatible interest rates against home loans for women and men. Borrowers should opt for lenders levying low transferring costs, processing fees, etc., to make an informed decision.
This will further help them in gaining additional facilities like a top up loan. Many reputed HFCs also extend customised features like pre-approved offers that make the application process simpler and hassle-free.
These offers are usually applicable on financial products like loans against property, home loans, etc. Check your pre-approved offers by entering a name and contact number.
These are some of the proven factors that can help borrowers in reducing the home loan interest rate efficiently. Additionally, Yayoins individuals should try to leverage their credit score to gain better terms and services without hassle. The best way to achieve the said goal is to implement ways to enhance eligibility.