Easy tips to reduce your home loan interest rate

Easy tips to reduce your home loan interest rate

As per data shared by GlobeNewswire, India’s housing loan market is expected to witness a CAGR of 22% between 2021 and 2026. The reason for such a surge has been accredited to factors such as urbanisation and availability of housing loans at competitive home loan interest rates.

The report further highlighted that the salaried segments make up 88% of home loan borrowers by customer type. Even though they can avail a housing loan at a competitive rate of interest, they still look for ways to lower it further. They do so to facilitate an easy repayment process and prevent their available disposable income from straining.

Top ways to lower housing loan interest rate

Here’s a list of effective ways of reducing housing loan interest rates – 

Tip 1 – Pay extra EMI each year

When an individual opts to pay an extra home loan EMI during each year of repayment, he/she automatically shorten the tenure, bringing the overall interest amount down. This payment of an excess EMI before its schedule is known as prepayment. Most lenders do not charge any additional fee for such payment.

Tip 2 – Pick a shorter tenure 

While shortening the tenure leads to increased rates, the actual interest cost of a loan decreases in such cases. This is because the principal is repaid quicker, which restricts the time for the interest charge. Individuals can use a home loan EMI calculator to understand how tenure impacts both the loan EMI and overall interest amount. 

Tip 3 – Improve creditworthiness

Financial institutions prefer creditworthy applicants with a CIBIL score of at least 750, as these borrowers are less likely to default. Nevertheless, individuals can improve their creditworthiness by increasing their CIBIL score for home loans and maintaining a stable income source. 

The best way to do so is by maintaining a low credit utilisation ratio, preferably, less than 45% and repaying debts on time. With enhanced creditworthiness, applicants will be better positioned to negotiate for a lower home loan interest rate.

Tip 4 – Co-apply for the loan

Many financial institutions extend home loans to women borrowers at a preferential rate of interest and simpler terms of repayments. Individuals make the most of this facility by co-applying for a home loan with their wife. It will also help to increase their home loan eligibility.

Individuals should consider availing a home loan from financial institutions that offer a high credit against simple repayment terms. They should also check the accompanying processing fees to make an informed decision and pick a lending institution that transparently accounts for the entire process.

Leading financial institutions extend pre-approved offers to customers to make the process of availing a financial product less cumbersome. Generally, such offers accompany home loans, loans against property, etc. You can check your pre-approved offer online with the help of name and contact number.

Tip 5 – Consider refinancing

Existing borrowers can also lower their home loan interest rate by opting for a loan balance transfer. Ideally, such a facility proves useful when the new lender levies a lower rate of interest and charges minimal fee. Nevertheless, borrowers should find out how a home loan balance transfer works and the ideal time to opt for it to make the most of it in their favour. 

Besides these, individuals must compare the prevailing home loan interest rates to pick the one that makes loan repayment seem easier. However, they should also factor the credit option’s accompanying features and benefits to pick an ideal loan option.