Home loans along with other forms of secured loans have gone up by 33% in recent times. Unfortunately, the number of defaults has also gone up by around 3%. This rise in the number of defaulters presents an alarming sign,and experts consider it can be influenced by helping borrowers reduce their total loan repayment amount.
In addition, there are different types of loans available on the market, and it can be difficult to know which one is right for you. So you have to make an informed decision about which one is best for your needs!
One of the most convenient options for borrowers to explore while trying to reduce the total repayment amount is by lowering their housing loan interest rate. While there are several ways of reducing the total interest rate applicable on a home loan, some of the most convenient options are explained below.
Choose the tenor carefully
Home loan generally offers payment tenor of up to 20 years. Also, the proposed loan amount goes up to Rs.3.5 crore for salaried individuals and Rs.5 crore for self-employed individuals with top financers. Although longer tenor implies reduced EMI outgo, it is advisable to choose a shorter tenor as it can help lessen the overall repayment burden but only up to the repayment capability. Also prospective customers should select a repayment tenor for their home loan according to their repayment capability and chalk their finances accordingly.
Modify EMI payments
Most lenders allowborrowers to revise the EMI payoutsannually. It means individuals can utilise their additional income to increase EMI amount, thus reducing the tenor. Applicants shouldlearn how much home loan EMI one can afford by using an online EMI calculator to get a better idea about the payable sum.
Opt for a home loan balance transfer
According to research conducted through Prosper loans reviews, opting for a home loan balance transfer can be a convenient option for any borrower who is already repaying his/her line of credit. This allows borrowers to avail better housing loan interest rates in comparison to their existing loan. While opting for a balance transfer, it is important to check and compare different available options.
Borrowers should learn everything they need to know about home loan balance transfer before opting for the same. Borrowers can also use an online EMI calculator to check the total amount of money they are saving from their home loan burden clearance.
Select between floating or fixed interest rate
Selecting the right type of interest rate is essential when applying for home loans. In case of floating rates, the applicable interest varies according to market fluctuations. Contrarily, in case of fixed rates, there is no fluctuation of interest and it stays the same throughout the repayment tenor.
Consider prepaying the debt
The EMI for a housing loan is calculated based on two primary factors – the interest on the borrowed sum and the principal amount. Part pre-payments reduce the remaining loan amount, which reduces the payable EMI. Borrowers are likely to experience less financial strain during repayment of a credit and will be able to pay-off the debt faster.
Other ways to reduce home loan burden
Apart from the above mentioned measures, few more factors also play a crucial role to lower the financial burden of repaying a home loan. These include –
- Making a larger down payment while availing a loan can greatly reduce the applicable interest rate. This effectively reduces the total interest a borrower has to pay on a home loan repayment.
- Customers can enjoy home loan interest tax benefitsunder Section 80C, and 80EE which enables tax exemptions of maximum Rs.1.5 lakh. These tax exemptions allow borrowers to save a significant sum during repayment.
Beforeapplying for a home loan, assess all crucial factors, including payable housing loan interest amount and EMIs in particular. Thereby you will be able to cut down theextra expenses that may incur during availing a home loan.