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Quick Guide for Securing a Better Interest on Home Loan in India

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  • Quick Guide for Securing a Better Interest on Home Loan in India

Purchasing a new house is a huge step in one's lifetime. While the prospect of purchasing a new house always seems exciting, it is imperative to plan the step towards it prudently. A well-designed move can save the buyer financial strain. At the same time, it can also ensure a comfortable life. It is essential to follow what most financial experts recommend. For instance, they say that it is always a good idea to get an idea of the value of the property. It is also wise to consider investing in properties after ascertaining that they are being sold at the most appropriate price. Therefore, some amount of legwork is needed before starting the buying process.

If a borrower has identified the house and is now looking for a housing loan, some tips can come in handy. The following home loan tips will help secure the most appropriate interest rate. It will also help keep the overall home loan interest cost low during the home loan tenor.

Tips for Securing a Better Interest on Home Loan

Add spouse as a co-borrower

The lowest home loan interest rates are reserved for female borrowers. It is common for male homebuyers to co-borrow with wives to avail of the lowest rate. This encourages women to seek housing loans because of the concessions on the interest rates, and the fuss-free eligibility criteria. 

Keep an eye on the credit score

The borrower should maintain a healthy credit score to avail of a home loan with attractive benefits. A borrower who has a credit score of more than 750 is likely to avail of a home loan at an interest rate that is on the lower side. 

Therefore, a borrower must keep a tab on credit scores always. They can check their credit score online for free from time to time. If the score is not sufficient, then they must boost it before applying for a big loan. However, there are ways to boost your chances of approval despite a low credit score, which includes having a dependable co-applicant in your loan application.

Seek the lender’s EBR or RLLR

When a borrower walks into the bank or explores home loan interest rates online, they need to consider the bank’s external benchmark rate. Lenders offer external benchmark linked loans that are linked to the RBI’s repo rate. The benefit of seeking this rate of interest is that when there are favourable market conditions, the benefit of lowered EMIs will be passed on to you, through your interest rate.

Maximize the down-payment amount for the home loan

Irrespective of whether a borrower chooses a bank or non-banking finance company, it is always a good idea to put down a sizeable amount as your down-payment if you’re able to afford it. The higher is the down-payment amount, the lesser you will need to borrow from your lender. This translates to lower EMI payouts, and in fact – a higher chance of your home loan application being approved, given your financial stability and repayment capacity.

Negotiate with the lending institution

As a borrower with a healthy credit score, who meets all the lender’s eligibility criteria, you also hold some power to negotiate better lending terms, including a lower interest rate and a longer loan tenor. This is obviously easier for those with a credit score of 750 and above, with a strong repayment capacity. Other components that make a difference are your source of income, employment and your existing rapport with the lender.

Ensure job stability

Lenders typically prefer borrowers who have been employed steadily for at least two consecutive years. If they have been unemployed for a significant period or switch jobs too often, the chances of getting a favorable home loan interest rate may be low. Thus, there is limited scope for negotiation also.

Opt for a longer home loan tenor

If the principal amount and interest accrued are divided over a longer tenor, a borrower ends up with a relatively lower EMI. However, the borrower also must pay the housing loan EMI and the interest for a longer time.

We recommend borrowers to come up with their own repayment plan, well in advance before they apply for a home loan so they know what kind of financial commitment they are getting into, and your lender is also confident in your repayment abilities.

The Final Word

Once a borrower has clarity concerning the home loan EMI and is also comfortable with the down payment, it is then, time to compare home loan interest rates quoted by several lending institutions. A borrower must check home loan interest rates and associated fees, besides the loan tenor and amount. The charges depend on eligibility factors like age, income, and CIBIL score. For more information on home loans and interest rates, borrowers must visit the official website of the chosen lender.

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