How Can Existing Borrowers Reduce Their Home Loan Interest Rates?
Buying a nest in which you can lay your head comfortably after a hard day at work is an expensive proposition. As the years roll by, the burden of generating the funds to finance your dream abode is increasing. If the government is keen on achieving its target of ‘housing for all’ by 2022 it will have to provide enough support to the real estate sector so that homes are made more affordable. But getting a loan to buy your house and then working on repaying it through EMIs can be mind-boggling. No one wants to be saddled with a Home Loan that makes a sizeable dent in his or her income. Here’s how you can pay less on the borrowings that finance your home.
Extend the Tenure
If you have longer repayment period, your Home Loan interest rates can be reduced accordingly as your principal and interest is distributed across a larger number of months. However, while Home Loan EMI will be smaller in the long run you will actually be paying more interest.
Increase Down Payment
When you get your loan, don’t forget that you also have to make a large down payment for your home. This reduces your principal. The smaller the principal, the lower the interest and the lower the EMI. It might seem like a big hole in your pocket, but this is the best way to meet long-tenure loans like Home Loans, which involve paying back for years on end.
Another way you can reduce your Home Loan EMI for a large part of your repaying period is to prepay a large amount when you find yourself able to afford it. It is best to do this in the initial stages of the tenure so that your principal decreases, thereby reducing your interest on subsequent payments.
Switch to MCLR
If you have approached a public or private sector bank for your Home Loan you can hop from a base rate to marginal cost of funds based lending rate (MCLR), which lets you derive the maximum from changes in interest rates as it is directly linked to repo rate. There is however a cost involved as banks levy a conversion fee.
Switch to a Lower Rate
If you have taken a Home Loan from a housing finance company or a non-banking financial company, you can tweak your interest rate by paying a conversion fee and switching to low existing rates. The way housing finance companies and NBFCs do this is by changing the spread, which results in an overall reduced rate.
Find Another Lender
Chances are that if you scout around you may find someone who gives you Home Loan with better terms and conditions than you are presently experiencing. Do a Home Loan Balance Transfer and take advantage of lower interest rates as well as flexible repayment options from a new lender. However, don’t just jump into it, but weigh the cost involved in transferring your loan. If your liabilities turn out to be more it is not worth running to another lender.
Bajaj Finserv lets you prepare for that house warming party with attractive Home Loans that can mean greater savings.
For instance, if you are paying a base rate of 10% on your current loan, a transfer to Bajaj Finserv can mean great savings over your remaining tenure.
|Tenure of Loan||Savings per lakh for remaining tenure (in Rs.)*|
*The savings listed above may vary depending on processing fee and other charges as applicable.
And that’s not all: The company not only lends you money for the concrete structure, but also for the furnishing and fixtures. It also lets you foreclose your Home Loan anytime during your loan tenure without paying any charges. There’s also a three-month EMI grace period to help you repay that loan.