Paying back a home loan is a long drawn process and it requires you to keep paying upto 20 years. Hence, if you do not follow the directives well, then you will see your EMIs getting significantly affected. To reduce that kind of pressure, you should work on reducing the home loan interest amount.
The most important part here is to locate the best lending institution who can guarantee lowest rate of interest, and confirming that the lender gives you assured MCLR-linked interest rates (which are already authenticated).
Besides, the above mentioned pointers, there are few other tips to reduce your loan interest at the earliest.
4 Tips to Reduce Home Loan Interest Rates:
1. Select a tenure which is short & manageable-
Obviously, a longer tenure can create a long term strain for higher interest payments. This way, you can diligently select a tenure at the time of using a home loan EMI calculator. Set up a tenure to arrive at your ideal EMI amount. This will be much easier to take a concrete decision.
2. Make prepayments at regular intervals
You should not forget that every EMI is a combination of principle and interest. In the initial years, you pay more of the interest bit & less of the principle. Hence, its highly recommended to keep making repayments to reduce your principle & interest both. The prepayments could be your annual bonus, incentives, FD maturity amount, etc. There are some existing players who do not charge anything for pre payments. Big players’ in the market permit you to part prepay your loan amount without imposing heavy fees. This will automatically reduce total interest component levied upon you.
3. Get your home loan transferred
If your home loan is at a higher interest relative to other giant players in the market, then get your home loan refinanced. This will reduce your rate of interest and eventually your financial burden. A home loan from an established financial company can get you a reasonable interest rate.
4. Rationalize your EMI amounts on a frequent basis
A few lenders permit you to rationalize your EMIs as and when it’s convenient on an annual basis. So, whenever you realize to earn greater than before, you can approach your lender to increase your regular EMI amount. For e.g. every 10% increase in your income leads to 5% hike in your EMI. A small change in the EMI may look insignificant, however this can easily decrease your overall tenure and thereby the offered rate of interest.
Read More: RBI Guidelines for Home Loans
To summarize quickly the 3 simplest steps to reduce home loan interest rates.
- Start by choosing a shorter repayment tenor
- Make prepayments whenever you have a surplus
- Minimize interest by refinancing your home loan
- Increase your EMI payout annually to reduce the interest rate
These small steps can ensure to bring down your quick loan interest rate, however whether significantly or insignificantly will be subjective.