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4 Top Tips to Reduce Your Home Loan Interest

  • Highlights

  • Start by choosing a shorter repayment tenor

  • Make prepayments whenever you have a surplus

  • Reduce interest by refinancing with Bajaj Finserv

  • Increase your EMI payout annually to reduce the interest rate

Repaying a home loan can be a lengthy process, as you may choose a tenor up to 20 years. 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 4 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. Adjust the tenor of your loan to arrive at the maximum EMI you can pay each month. This EMI amount will get easier for you to pay as you are sure to earn more as time passes.

Make regular prepayments

Remember that the EMI for the home loan consists of two parts: 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, during this time, it is better for you make part prepayments when you can using your work bonus, salary hike, and other income. Most lenders like Bajaj Finserv, allow you to part prepay your home loan without charging any fees. This 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

Fixed or Floating Interest Rate | Which is Ideal for 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 every 10% increase in income, up your EMI payment by 5%. A regular reworking of the EMI may seem like a small 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 a low interest.

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