The recent repo rate cut by 40 bps has made availing loans more affordable for borrowers. Likewise, it would also provide much-acknowledged relief to existing borrowers by reducing their outstanding loan burden significantly. Nonetheless, borrowers can further lower their loan burden considerably by undertaking ways to reduce the applicable interest amount.
For instance, home loan borrowers can pay reduced interest by making a few adjustments to the factors influencing the same. In turn, it would also help reduce home loan EMI and make monthly repayments affordable.
Tips to lower interest payment
By following these tips, one can reduce the amount of interest levied on an existing loan successfully.
Pick a shorter tenor
A shorter tenor proves useful in more than one way. It does not just ensure early repayment of the loan value but also leads to lower interest accumulation than with a higher tenor.
It is because the interest is calculated for a fewer months. However, choosing a shorter tenor means a higher monthly installment. So, you must make this decision based on your repayment capacity. You can check how the tenor influences your loan EMI and interest rate by using a reliable home loan EMI calculator.
Subsequently, you should approach their lender and negotiate a fair bargain. Several financial institutions are open to tenor negotiations and do not levy any hidden charge and require borrowers to pay just nominal fees.
Other than this, individuals must also make it a point to check out the other charges and processing fees, which accompany their home loan.
Increase EMI amount
By increasing the loan EMI amount, borrowers can lower the interest burden to a great extent. As discussed, it is mostly the unpaid loan amount that attracts interest. So, if borrowers can afford to pay higher EMIs, they should do so without any hesitation. As it will directly lower the outstanding amount and in turn will not attract as much interest as it would otherwise.
Consider balance transfer
Existing borrowers can lower their interest burden by transferring their existing housing loan through a balance transfer facility. It allows an existing borrower to refinance the loan from a lender who charges a lower interest rate than their current lender.
Simultaneously, it not only reduces home loan EMI with a balance transfer facility but also brings better terms of services. Regardless, the expenses involved with a loan balance transfer must be accounted for to scrutinise if the decision will help save more on such refinancing or not.
Several lenders make the process of how to reduce EMIs with a home loan balance transfer facility simple and affordable.
They also provide customers with exclusive pre-approved offers which prove useful in making the entire financing process less cumbersome. Such offers also accompany financial products like home loans and loans against property. You can check your pre-approved offer in a few steps by simply providing details like name and contact number.
Prepaying loan amounts also proves useful in lowering total interest paid on the loan. In situations when individuals have funds available in a lump-sum and can afford to pay off more than their current EMI, they should consider prepaying the advance through either part-prepayment or foreclosure.
It not only lowers the interest amount but also allows borrowers to repay the loan earlier than previously intended.
Notably, there are a few charges which must be factored in by home loan borrowers. For instance, foreclosure fees, part-prepayment charges, and other penalties often tend to increase the cost of the loan. Also, a well-timed prepayment option can help make significant savings on interest payments and reduce home loan EMI.
Further, when in the process of availing a home loan, individuals can undertake the following two measures for an affordable interest rate.
Opt for a higher down payment
Individuals may consider making a higher down payment to avail the loan at competitive rates. Typically, borrowers are required to pay 15-20% of the cost of the housing property as a down payment.
If possible, borrowers should consider making a higher down payment than the standard percentage. In turn, it will help them avail a higher loan amount too as a percentage of property value, and will also help reduce home loan EMI.
Take steps to improve your CIBIL score
Borrowers who hold a high CIBIL score of over 750 and have maintained a clean credit history are better positioned to negotiate for lower interest rates than most others. Also, a healthy credit score can determine your home loan EMIs and influence the same.
To do so, individuals should try to repay their existing debt in time and maintain a lower credit utilization ratio, among other measures.
These are a few tips with which individuals can reduce home loan EMI in India successfully. They must also take care to make timely EMI payments for improved management of finances.