Repaying a home loan can be a lengthy process. So, if not worked out properly, home loan EMIs can weigh down your monthly budget for a long time to come. To reduce the burden, you can find ways to decrease your home loan interest. Two of the most important things to take care of are finding the right lender who offers you the lowest interest in the market and ensuring that your lender gives you MCLR-linked interest rates, which reflect the lowest prices much faster. Besides these two points, here are four tips to help you reduce your home loan interest.
Choose a shorter tenor as more time = more interest!
A longer tenor means that you will end up paying more interest. So, choose your home loan tenor carefully right at the onset using a home loan EMI calculator. Then, adjust your loan tenor to arrive at the maximum EMI you can pay each month. This EMI amount will get easier for you to pay as you will earn more as time passes.
Make regular prepayments
Remember that the EMIs for the home loan consists of two parts: the interest charged on the borrowed sum and the principal. During the first few years of repayment, you pay more towards the levied interest and less towards the principal. So, it is better for you to make part prepayments when you can use your work bonus, salary hike, and other income during this time. In addition, most lenders like Bajaj Finserv allow you to part prepay your home loan without charging any fees. Thus, it will help reduce the principal and thus reduce the total interest levied on you.
Get a home loan balance transfer
If your current home loan is at a higher interest than what other lenders are offering now, think about refinancing your home loan. A home loan balance transfer from Bajaj Finserv, for example, gets you a more affordable interest rate along with a 3 EMI holiday and access to a low-interest top-up loan.
Additional Read: Tips for refinancing your home loan
Revise the EMI payouts every year
Some lenders allow you to revise your EMIs annually. So, once you get a salary hike or experience a consistent increase in your income, you can increase your EMI amount. For example, for every 10% increase in income, you can up your EMI payment by 5%. A regular reworking of the EMI may seem like a slight shuffle, but every increase will decrease your tenor and thus reduce your home interest rate.
Follow these factors that impact your home loan interest rate and repay your loan judiciously and with low interest.
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