A housing loan is one of the biggest financial liabilities one takes in their lifetime. Besides, it is a loan with the longest repayment tenure as well. That is why most Home Loan borrowers look for ways to minimise their EMIs. Smart financial strategies involve getting the minimum interest paid so the borrower has more savings by the loan term-end.
Whether you are planning to apply for Home Loan or are in the middle of the loan term, here are six practical tips from an insider that help bring down the loan EMI amount.
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Qualify for the Lowest Interest Rate
Home Loan interest rate significantly impacts the EMI amount and the overall loan cost. Loan companies determine an applicant’s interest rate according to income, credit rating, financial capacity, repayment ability, job stability, and other factors. An insider suggests that loan providers consider such applicants low-risk borrowers and charge lower interest rates. Therefore, maintain a high credit score of 611 or above and minimise the debt-to-income ratio to improve loan eligibility and repayment capacity.
Regularly Make Part Pre-Payments
Making part pre-payments whenever possible is an excellent way to reduce the EMI amount. Doing that disburses a chunk of the loan amount, reducing the EMI to be paid during the tenure. Simple techniques include using bonuses to pay an extra EMI, adding additional income sources to increase the EMI amount, etc.
Transfer to a New Lender
Most financial institutions allow borrowers to transfer their current loans to other loan companies. If another lender offers a lower interest rate than the current loan plan, consider transferring the loan balance to the new lender to save money in the long run. It is a great feature that every home loan borrower must consider. Compare loan plans from various loan companies, give attention to the pre-payment charges, manage the documents required for housing loan balance transfer, and take the leap after careful evaluation. Reduced interest rates will eventually lead to smaller EMIs.
Opt for an Extended Tenure
Extending the loan tenure to reduce the monthly instalment amount is a predictable technique to make EMIs more manageable. While facing financial constraints, the borrower can get some relief by extending the loan tenure, which reduces the EMI amount and allows repayment at a more suitable pace. However, the interest outgo will increase by the loan term-end.
Increase the Down Payment Amount
Most reputable housing finance companies fund up to 90% of the property’s value with a Home Loan. However, instead of making the minimum down payment of 10-20%, borrowers must contribute the maximum amount from their savings. Doing that will reduce the loan requirement, improving the chances of approval and reducing the EMI amount due to smaller loans.
Consider Loan Restructuring
Since Home Loan is a long-term commitment, borrowers may face several ups and downs during the tenure. Several unfavourable circumstances, such as job loss, divorce, disease, or disability, may make EMI payments challenging for the borrower. To help such individuals, the RBI proposes restructuring the loan.
To revise the loan plan, the borrower facing financial woes must contact their loan provider and submit a special request with proper documents and proofs. If the loan provider is satisfied, they may waive off some EMIs or extend the loan tenure according to the borrower’s requirement. Lenders prefer getting some of their money back rather than a complete loan default.
Consider all these points to make the Home Loan EMI more affordable. Resort to a loan company that supports these provisions, and the repayment is all set! Apply for Home Loan from a reputable loan company offering competitive interest rates and easy eligibility conditions to get the best loan offer.
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