Reports show that home loans constituted about 13.13% of total credits disbursed in the financial year 2018-19. Such a rise in the demand of this advance can be attributed to several factors – the most crucial one being a reduction in housing loan interest rates.
Now, while lending rates have seen a consecutive drop in the past few months of this financial year, the chances of a rise in interest rates remain high, given the instability in the Indian economy. For this reason, it is pertinent for borrowers to be aware of the methods through which they can reduce interest payments on their home loans.
How to reduce repayment liability on housing loan?
RBI has made it mandatory for financial institutions to link their lending rates to an external benchmark for various loan products. Interest rates are thus expected to fall even further allowing borrowers to avail of a high loan amount, home loan interest tax benefit, etc. Nevertheless, in the case of a rise in home loan interest rates, individuals can follow the steps mentioned below to reduce their repayment liability –
- Opt for a shorter loan tenor
Even though a longer tenor might allow you to reduce your monthly repayment amount, it can lead you to pay higher home loan interest rate in the long run. While home loans offer a tenor ranging up to 20 years, opting for a longer tenor will lead you to make more EMI payments. As a result, the cumulative interest you pay on the advance is more than the previous anticipation.
It is thus wiser to choose a shorter tenor and repay your loan at the earliest. To ensure that you don’t end up paying more interest against your loan, you can calculate your repayment amount with the help of an online home loan EMI calculator before applying for it.
- Prepay your loans
There may be times when you have an inflow of extra cash in hand. In such situations, it is best to make prepayments of your home loan amount. Choosing for loan prepayments can allow you to service your debt faster, and consequently reduce your overall interest payments by quite a margin.
Nonetheless, most financial institutions providing home loans in India levy charges if borrowers choose to prepay their advance. It is thus crucial to check for all related charges before availing this option.
- Opt for a balance transfer facility
A home loan balance transfer is a facility through which individuals can choose to transfer the outstanding balance from their existing housing loans from one lender to another. With this facility, borrowers can opt to avail of the services of a financial institution offering lower housing loan interest rates.
With this facility, the borrower’s outstanding loan amount with one lender is repaid by the second financial institution. The existing loan account is then transferred to the second lender where individuals can avail lower interest rates offered and reduce their payment for the same. The facility is, however, offered only by select financial institutions such as Bajaj Finserv.
Additionally, the NBFC also provides pre-approved offers which make financing faster and easier. You can enjoy these offers on several financial products, including home loans, personal loans, and business loans. You can check your pre-approved offer by providing your name and phone number and avail of a Bajaj Finserv home loan.
Also Read: These Factors Are Going to Affect Your Home Loan Interest Rates
Apart from these, individuals with a high credit score can also negotiate with their lenders for a lower interest rate on their home loans.
While lower housing loan interest rates are important, it is also crucial for borrowers to check other benefits offered by their lenders to maximize their benefits from the advance.
For instance, a high loan amount value, flexible tenor, minimal documentation, instant approval, and easy disbursal of the loan are some of the critical points to check before applying. These are a few lesser-known benefits of home loan that can allow borrowers to enjoy maximum benefits from it.