Home loan is a loan which can be used for the purchase of a house, construction, repairs or renovation of your existing house. However, opting for a home loan is not an easy task, it is the biggest financial commitment that one can make in his life because the tenure of the home loan goes up to 30 years. Purchasing or building a home is a huge undertaking as it requires lots of investment. The loan amount you can apply home loan is higher as compared to a personal loan or car loan. So, we should try to reduce the interest rate on a home loan.
Few ways to reduce home loan interest rate are:
Shorter loan tenure
You should always try to take a home loan for a shorter tenure because opting for a longer tenure may lead to lower EMIs but a higher rate of interest. We should opt for shorter tenure so that the principal amount is repaid in the short duration.
Higher down payment
You should always try to make higher down payment because making higher down payments helps in reducing the principal amount which results in the lower rate of interest and monthly EMIs. So, try to opt for higher down payments.
Compare the interest rate
Always compare the rate of interest of all the banks and NBFCs before applying for the home loan because different banks and Non-Baning Finance Companies (NBFCs) have a different rate of interest. So, first, you should check and compare the rate of interest of all banks, then go for the bank which has a lower rate of interest.
Home loan buyers have the option to prepay the entire or part of the outstanding amount before the end of the tenure. Prepayment of home loan helps in reducing the principal amount as well as the interest rate. So, whenever you have surplus money try to make the prepayment of your home loan.
Opt for home loan balance transfer option
A balance transfer is a process by which you can transfer the entire outstanding loan amount to another lender at a lower rate of interest and other better terms and conditions. However, you should consider switching, only if you are getting a lower interest rate of interest compared to the current rate of interest. A home loan balance transfer facility is available in all banks and NBFCs. A balance transfer is a good option for reducing the rate of interest.
Opt for extra EMI
Salaried employees receive annual bonuses which can be used to pay an extra EMI. This will help in not only saving the rate of interest but also in repaying the home loan faster. Paying a high EMI can help you manage your home loan better.It will help to reduce the loan tenure which means that the total interest that you are supposed to pay to the lender also goes down. So, whenever you have extra money, you can pay extra EMI, go for it.
Conclusion: Above these are the ways which help in reducing your home loan rate of interest. Take into account the above points to reduce your home loan interest rate. Also, don’t miss your EMI payments as it can severely affect your credit score.
Additional Reading: – Some Ways to Reduce Home Loan Interest Rate
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