A home loan is just a type of financial instrument that aims to help you to buy your dream home. This loan is offered by Shriram Housing Finance, LIC Home loan and various other popular lenders at a pocket-friendly rate of interest. However, a home loan in India is one of the longest repayment tenure loans and thus, you must endow a long-term financial commitment. While the rate of interest (ROI) is affordable, holding the loan for a long repayment tenure may drain most of your money. Thus, it is recommended to close your home loan at the earliest with surplus funds in the future. The next option that can help you lower your home loan burden is by opting for a lower rate of interest on a home loan. Here in this blog, we will explain how to lower your home loan EMI burden both pre and post availing the loan.
How can one save on the home loan rate before making an application?
Home loan interest rates differ from one lender to another. And to avail the best home loan rate of interest, a comparative analysis is necessary. Well, you can do so either by comparing amongst different lenders online or by approaching your bank with whom you share a long-lasting relationship. To make this simpler, you can even visit the online lending markets where you can avail all the home loan offerings from Shriram Housing Finance, LIC home loan and other lenders in a single place. You should note that availing of a home loan is one of the crucial financial decisions, and thus you must always conduct research before zeroing on one lender.
Including a co-application your home loan application
If you are looking to place an application for a home loan, including a co-applicant to the application can lower your rate of interest. When calculated for the whole repayment tenure, it would lower your overall borrowing cost. Usually, the rate of interest (ROI) is lowered by 0.50 percent by including a co-applicant. It also enhances your eligibility for a home loan and can assist you in availing of some additional loan amounts.
Enhance your credit score
Your credit score in India is one of the crucial factors, which can bring about a change in the rate of interest of your home loan. A loan seeker with a strong credit score is usually preferred by the lender and has higher home loan approval chances at the lowest rate of interest. However, if you place an application for a home loan and do not have a strong credit score, then there are chances of your loan application getting rejected. Thus, it is extremely crucial to check your score before you place an application for a home loan. If you find it low, ensure to take the required steps to ameliorate it, or in case you got any doubt, you can even write to the credit bureau directly.
Choose longer loan repayment tenure.
Choosing a higher repayment tenure when placing the application not only reduces your EMI outgo but also leads to the enhancement of your loan eligibility. However, as a higher repayment tenure increases your overall interest cost, seekers should choose to prepay as and when they get any surplus amount in future. Remember that for the floating-rate loan, RBI has disallowed lenders, including Shriram Housing Finance and LIC Home Loan, from levying foreclosure or prepayment fees, while in the event of a fixed-rate loan, a lender may charge prepayment or foreclosure fee. Ensure to take the assistance of an online home loan calculator to compute the optimum loan tenure based upon your capacity to repay.
Opt for a higher down payment amount
As the RBI allows lenders to fund around 90 percent of the property value as a home loan, seekers require arranging the rest of the amount in the form of a down payment from their pocket. Though many of the borrowers usually try to contribute a minimum margin or down payment amount, selecting a higher down payment amount is a better option in most cases. Opting for a higher down payment amount leads to a reduction of your loan requirement, which on the whole, results in a lower EMI and interest cost. As choosing a higher down payment lowers the risk of lending for a lender, it increases your approval chances. However, a higher down payment should not be made at the cost of your emergency fund or your important investment especially meant to attain your crucial long-term goals. It is because doing so may make you take up a costly loan for financing your crucial goals or for mitigating your financial contingencies.
Ensure to compare the home loan offers amongst multiple lenders
You should always ensure to strike comparison amongst various credit options based on the interest rate, processing fees etc., before finalizing the lender. Rate of interest and various other linked expenditures vary across various lenders based on the credit risk assessment of the loan seeker. For instance, many home loan lenders offer home loans at a lower interest rate and charge to the ones with a good credit score equaling 750 and above. Also, many lenders offer home loans at a lower interest rate depending on the employer profile or job. One of the crucial ways to compare rates and various other features is to visit the online markets. These markets facilitate the correct home loan comparison provided by the lenders based on the monthly income, credit score, job profile and other important eligibility criteria.
How can you save on the interest rate on your home loan once you have applied for it?
Opt for the balance transfer option
A home loan balance transfer, also called the home loan to refinance, is a prudent way to lower your burden on home loan interest. However, it can just be availed on the ongoing home loan. It means if you are already servicing a home loan, then only you can get this facility. But to avail of it, you should hold an excellent history of loan repayment and must have serviced the home loan for over 2-5 years. When you get this facility, your ongoing loan is closed with your lender, and the outstanding loan amount is transferred to another new lender. Home loan balance transfer option mostly is done to bring the interest rate of home loan down or to get favourable terms and conditions on your loan.