6 Ways to Reduce Your Home Loan Interest_banner_WC

Banner-Dynamic-Scroll-CockpitMenu_HomeLoan

6 Ways to Reduce Your Home Loan Interest_WC

4 min 26 Jan 2023
Tips to Reduce Your Home Loan Interest Burden
Highlights:
  • Types of Interest Rates Offered by Lenders in India
  • Tips to Reduce Your Home Loan Interest Rate

Home Loan interest rate is one of the key components that determine the affordability of your loan. Low Home Loan interest rates keep EMIs on the lower side and build an asset in a convenient and stress-free manner. In this article, we will share with you some tips on how to reduce Home Loan interest rates and also explain the types of interest rates. 

Tips to Reduce Home Loan Interest Rates

1. Research for the best deals on Interest Rates

At a superficial level, you may talk with various lenders who may offer you a housing loan. You will definitely find one offering you the lowest interest rate. However, you cannot expect a huge difference in their offerings as most lenders base their rate of interest on factors like credit score which remain common. Choose to go with the lender offering the lowest interest rate as well as added benefits and facilities, such as low or nil prepayment charges, and flexible loan prepayment tenor.   

2. Maintain a Good Credit Score

A good score makes you a creditworthy and reliable borrower. Further, a good credit score also gives individuals high negotiating power. Thus, those with a credit score above 750 get the best Home Loan deals on lowest interest rates.  To maintain a good credit score, clear EMIs on time, pay all bills religiously, clear more than just the minimum due on your credit card and check your credit report for errors from time to time.  

3. Make a Higher Down Payment

Under a Home Loan, lenders sanction anywhere between 80% to 90% of your home's value as a loan. The remaining amount has to be paid by the lender in the form of a down payment. Lenders do this to ensure borrowers have some stake in the property they are buying and therefore, will be committed to paying EMIs on time and clearing the loan as soon as possible. Borrowers can choose to make a higher down payment. If you increase the value of your down payment, not only will your principal amount decrease, leading to reduced interest outgo in the long run, but the lenders will also be willing to offer you a lower interest rate since the risk involved for them in lending you the money will decrease.  

4. Make Prepayments Whenever Possible

If you are an individual borrower paying off a Home Loan on floating interest rates, know that you can make part-payments at any time at no additional costs. If you are an individual borrower paying off a loan at fixed interest rates, know you can make prepayments at any time of the loan tenor without paying any additional fee if you use your savings to pay off the loan. Thus, make prepayments whenever possible -- whenever you get a bonus, good commission on a sales deal, money from selling shares, etc. This will lower your total principal amount, the total interest outgo and therefore, the effective interest rate.  

5. Increase Your EMIs With Time

You can also reduce the total interest outgo by increasing your EMIs in the initial years to match the increase in your income each year. This way, you may not reduce the interest rate but you will save on the interest amount. 

6. Opt for Home Loan Balance Transfer

Lastly, if you think your current EMIs are becoming unaffordable for you, you can opt for a Home Loan Balance Transfer. A Home Loan Balance Transfer is a facility that allows borrowers to transfer their pending Home Loan from their current lender to another lender offering them lower interest rates and other benefits. Sometimes, Home Loan balance transfer involves a hefty fee and therefore, one must avail of this facility only after proper financial planning. Further, this option helps borrowers save maximum interest when availed of during the early years of the loan tenor.  

People Also Read: Home Loan Balance Transfer Process 

Types of Interest Rates Offered by Lenders in India

There are majorly two ways in which interest is offered in India – fixed and floating. Let us understand both of them.

1. Fixed Interest Rate

Under a fixed interest rate regime, the Home Loan interest rate offered to a borrower does not change with changing market conditions and stays constant throughout the tenor of the loan. The biggest advantage of opting for this type of interest rate is that it makes financial planning easy. Since a borrower knows their monthly EMI in advance, they can adjust their other expenses and monthly budget to accommodate the EMI amount each month.

2. Floating Interest Rates

Floating interest rates on Home Loans depend on external market conditions – when Home Loan interest rates go up, the applicable interest rate and in turn, the monthly EMIs, go up too. The opposite is also true - when Home Loan interest rates go down, your EMIs will reduce. Though floating interest rates make monthly budgeting slightly tricky, they are cheaper than fixed interest rates, which is a great advantage.  

Among the two types of interest rates, you have the scope to negotiate the floating interest rate. Let us understand 6 ways in which we can bag the lowest interest rate, particularly when looking for a home finance.

People Also Read: Difference Between Fixed and Floating Interest Rates 

Final Words

The interest rate on a Home Loan is a very important factor as a lower interest rate can save you a lot of money throughout the repayment tenor. Choose a loan tenor and monthly payment that will work best for your financial situation. You may also use our housing loan EMI calculator to determine this. Follow the tips shared in this article to avail yourself of the lowest interest rates on your Home Loan.     

Blog-Intro-Disclaimer

DISCLAIMER:

While care is taken to update the information, products, and services included in or available on our website and related platforms/websites, there may be inadvertent errors or delays in updating the information. The material contained in this website and on associated web pages, is for reference and general information purposes, and the details mentioned in the respective product/service document shall prevail in case of any inconsistency. Users should seek professional advice before acting on the basis of the information contained herein. Please take an informed decision with respect to any product or service after going through the relevant product/service document and applicable terms and conditions. Neither Bajaj Housing Finance Limited nor any of its agents/associates/affiliates shall be liable for any act or omission of the Users relying on the information contained on this website and on associated web pages. In case any inconsistencies are observed, please click on contact information.

Asset Publisher

Content with tag home loan .

Trending Articles
alt
home+loan Home Loan

[N][T][T][N][T]

A Complete Guide for Home Loan Insurance
2023-04-03 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

Benefits of a Home Loan
2023-02-20 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Pay Off Your Home Loan Quicker
2022-06-29 | 6 Min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Choose the Best Home Loan?
2023-08-09 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

Advantages for First-Time Home Buyers
2023-07-14 | 4 min
alt
home+loan Home Loan

[N][T][T][N][T]

A Guide to Statutory Liquidity Ratio
2023-02-22 | 5 min
alt
home+loan Home Loan

[N][T][T][N][T]

All You Need to Know About Home Loans
2023-01-19 | 5 min
alt
home+loan Home Loan

[N][T][T][N][T]

Home Loan Burden Management: Five Tips
2022-06-27 | 3 min
alt
home+loan Home Loan

[N][T][T][N][T]

All About Home Loan Balance Transfers
2022-06-22 | 4 mins
alt
home+loan Home Loan

[N][T][T][N][T]

Types of Home Loan Charges
2022-06-27 | 3 Min
alt
home+loan Home Loan

[N][T][T][N][T]

How to Calculate Home Loan EMIs
2022-06-14 | 5 Mins
alt
home+loan Home Loan

[N][T][T][N][T]

Home Loan Terminologies 
2022-06-14 | 3 min
alt
home+loan Home Loan

[N][T][T][N][T]

The Importance of a Home Loan NOC
2023-01-31 | 7 min

Call_And_Missed_Call

RHS-insurance-ad-card

RHS Ads