Home Loans are the financial tools that have helped millions to purchase their dream homes. The loan is offered by all the banks and comes at pocket-friendly interest rates. However, home loans are the longest tenure loans and hence need more of your financial commitment. Though the interest rate is affordable, carrying it for a long tenure can drain most of your hard-earned money. So, it is advised to close your home loan as soon as possible. Another option that can save your money on home loans is- by going for a low-interest rate home loan. This blog explains how to reduce the EMI burden of your home loan both pre and post of taking the loan.
How can you save on a home loan interest rate before applying for it?
The interest rate for home loans varies from bank to bank. And to get the best interest rate for your home loans comparative research is a must. Well, this can be done online by visiting the portals of different banks and NBFCs. To make it easier, you can also visit DSA’s like Finance Buddha where you can get all the offerings from different banks in a single place. Remember taking a home loan is one of the biggest financial decisions and hence should not be taken without proper research.
Adding a Co-Applicant to your loan application
If you are planning to apply for a home loan, adding a co-applicant to your loan application can reduce the interest rate for it. When calculated for the entire tenure it will bring down your total cost of borrowing. Generally, the interest rate is reduced by 0.50% by adding a co-applicant. This also increases your home loan eligibility and can help you get some extra loan amount.
Boost Your Credit Score
Your credit score is one of the most important factors that can bring a change in the interest rate of your home loan. A loan applicant with a good credit score is always preferred by a lander and also gets the home loan approval at the lowest interest rates. But, if you apply for a home loan and don’t have a good credit score then there are chances that your loan application may get rejected. So, it is quite important to check your credit score before you apply for a home loan. In case you find it low take the necessary steps to improve it or in case of any doubt, you can write to CIBIL directly.
How can you save on a home loan interest after applying for it?
Go for Balance Transfer
A home loan balance transfer is also known as home loan refinance is a great way to reduce your home loan interest burden. However, it can only be availed on ongoing home loans. This means if you are servicing a home loan already, then only you can avail of a balance transfer facility. However, to avail of one, you must possess an excellent loan repayment history and must have served the home loan for more than two to five years (this period depends on your lender). When you avail of this facility your ongoing home loan is close with your lender and the outstanding amount of the loan is transferred to the new lender. A home loan balance transfer is mostly done to bring the home loan interest rate down or to get better/favorable terms for the loan.
Do Pre-payment or Part-payment whenever possible:
Well, going for a part-payment or pre-payment does not reduce your home loan interest rate but can save a lot of money that you need to pay on the interest. So, whenever you can have some savings, bonuses, or incentives coming you can use that to prepay your home loan. Doing this will reduce the principal amount and can save you money which you would have paid on the interest.
Typically whenever you go for a part-payment or prepayment you get two options- one is to reduce your loan tenure and the second one is to reduce your monthly EMI. So you have to choose one as per your requirements and can proceed ahead with it.
This was all about how you can get a home loan at a low-interest rate and how to reduce your home loan EMI burden if you are already serving a home loan.