A home loan is one of the most significant financial steps one may take in one’s life. But, repaying the loan on time is not easy. Moreover, since the house loan amount is generally large, the interest is a high additional cost.
So how to reduce these interest rates? Read on to know the money-saving tips when you take a house loan.
How to Keep Your Loan Interest Rates In Check?
Here are the best tips and methods that will help you lower interest rates on your house loan EMI:
Choosing a Home Loan Tenure:
If you apply for a house loan, you should know that the loan term determines the amount of interest you must pay. Although longer duration (20 – 25 years) lower monthly payments, shorter periods (10 to 15 years) reduce the total interest, you’ll have to pay. So, if you want to avoid paying more interest on your loan, be sure you select the term wisely. Any person wishing to calculate their loan EMI may use the house loan EMI calculator for their convenience.
The interest rate on loans may be variable or fixed, based on the rates. On floating-rate loans, creditors do not levy prepayment penalties, so you may make numerous prepayments on time to decrease the principal amount and get low-interest home loans. However, things are just the opposite with fixed-rate loans. In such cases, lenders charge a fixed percentage on prepayments. Therefore, you should always check with the house loan providers to see what prepayment penalties you could pay.
Compare Interest Rates:
It is usually good to research before taking any loan. Before closing a house loan, there are many aspects to consider, one of which is the interest rate charged by the lender. There are many methods for gaining a better understanding of the interest rates charged by lenders. It widens your scope and options. As a result, it’s far preferable to research and contrast the various rates offered by the numerous home loan providers before making a final pick.
Give More Down Payment:
It is an effortless technique to lower the interest you pay on your loan. Most individuals prefer to pay a lesser deposit and let the home loan provider help fund the majority of the loan. Instead of spending less, try to pay a higher down payment because the higher the down payment, the lower the loan balance. A more insufficient balance means you’ll pay less interest overall.
Higher Credit Score:
A credit score is a three-digit figure spanning from 300 to 900. Banks use it to determine your creditworthiness. It changes as per your payback history, loan account kinds, length of tenure on retained loan accounts, and payment patterns. You may receive better and cheaper loan rates if your credit score is more significant than 750. Home loan providers also prefer customers with a solid credit score. If you pay all installments on time, the lender’s possibility of charging low-interest home loans grows.
Increasing Your Monthly Installments:
Many home loan companies enable consumers to adjust their payments annually. This is a beautiful alternative for people who increase their earning capacity and earn a higher income. Moreover, since they may choose to pay immense EMIs to shorten the term, it lowers the total interest payable.
Paying home loan interest can be burdensome. However, the points given above will help you reduce home loan interest rates by a significant margin.