Home loans, while a convenient credit option, can weigh you down with higher interest rates and monthly instalments. Since this form of secured loan extends for a substantial number of years, borrowers should consider effective ways to plan their EMI pay-outs; such that the cost of credit is kept under check without overshooting the budget.
Tips to Reduce Home Loan Interest Costs
In spite of a cost-benefit analysis of different loan offerings, individuals should negotiate with lenders for competitive home loan rates and terms. Other than that, they can also follow the tips given below:
Shorter Loan Tenor
A longer tenor lowers the EMI pay-out, but it also increases the overall interest. Hence, one should opt for shorter tenors, which raises the monthly EMI sum while controlling the payable interest.
Pre-Pay the Loan
Making part pre-payments on your loan brings down the loan amount and the interest component, enabling you to close the loan earlier. Try to pre-pay periodically whenever you have some ready funds with you.
Refinance Your Loan
If you find a lender who offers better interest rates, you may transfer or refinance your outstanding loan amount to the new lender. A home loan balance transfer facility helps you to save on the interest cost, thereby making your loan cheaper than the existing one.
Annual EMI Revision
Borrowers may adjust the EMI outgo each year according to their financial condition. For instance, in case of a salary hike, one can pay heavier EMIs that will automatically decrease the loan tenor.
A higher CIBIL/credit score of 750 and above could fetch you lower home loan rates. So, maintain a good CIBIL score. However, if you have a poor credit score, enhance it with timely repayments and responsible credit behaviour.