Purchasing a house is one of the most expensive decisions to make. That is why affordability plays a vital role when it comes to getting the best EMI plan to ensure regular repayment. Home Loan EMIs are considerable monthly expenses the borrowers need to adjust in their monthly budget. Since they consume 30-40% of their net monthly salary, no one wants to save less for their future.
Here are a few simple ways to reduce home loan EMIs. Those who want to know how to reduce their home loan EMI will find these tips useful.
Choosing the Lowest Interest Rate
Depending on their policy, eligibility criteria, and the individual’s creditworthiness, different housing finance companies offer different interest rates to the same applicant. So, comparing interest rates from various loan providers is essential, as it increases the likelihood of getting the lowest possible interest rate. A difference of even a small percentage point can significantly increase or decrease the loan cost and impact affordability.
Making a Bigger Down Payment
According to the RBI guidelines, finance providers cannot fund 100% of the property’s cost with a housing loan. They approve 80-90% of the total amount, and the borrower pays the remaining amount as a down payment. So before finalising a loan provider in India,
Nowadays, you can calculate your EMIs online, as almost every reputable loan provider in India offers a home loan monthly EMI calculator on their websites. It enables aspiring borrowers to check the loan amount they are eligible to apply for. However, even if a borrower is eligible for 90% of the property’s cost, they must try to make the maximum down payment possible from their savings. Opting for a bigger down payment reduces the loan requirement and ultimately decreases the monthly EMI amount to pay.
Making Part Prepayments Whenever Possible
An excellent way to reduce the Home Loan EMI is making partial prepayments whenever possible during the tenure. Doing this help disburse a considerable chunk of the loan amount, thereby decreasing the EMI amount to pay. Simple strategies like saving extra income or bonuses through different avenues can help make these prepayments.
Extending the Loan Tenure
It is only predictable that extending the loan tenure will decrease the monthly outgo for each EMI. While facing a major financial constraint, extending the term is the best way to pay at an easier pace and get some relief in budget management.
Transferring the Loan Balance to Another Lender
Most financial institutions allow borrowers to transfer their current loan balance to other lenders. If you want to know how to reduce Home Loan EMI, a Home Loan balance transfer is an excellent facility that helps revise the interest rate and make EMIs more manageable. Comparing loan plans from different companies should continue even after receiving a loan. Keep checking other lenders’ interest rates and transfer the loan balance to another lender if you find a better deal.
Switching Between Fixed and Floating Interest Rates
Borrowers are likely to pay a higher price if they borrow a fixed-rate housing loan when the market is high. Many lending institutions also charge a few percentage points more for fixed-rate loans. Borrowers paying a high fixed rate can switch to a floating rate loan if the lender allows it. Some borrowers may shift from a floating interest rate to a fixed one to stabilise their EMIs and adequately plan their budget.
Loan Restructuring
Due to financial constraints, many borrowers may face difficulty paying their Home Loan EMIs. Such individuals have a loan restructuring provision from the RBI. They may contact their lending institution and request a loan restructuring. The lender may waive the EMI payments for a while or extend the term accordingly.
Renegotiating the Interest Rate
Often, borrowers do not get information about when lending institutions reduce their base rates. They keep paying the same interest rate to their lenders while new customers pay a lower interest rate than them. Loan borrowers with fixed interest rates will pay the same interest rate throughout the loan tenure. However, they can negotiate a better interest rate with the loan company to get a revised loan plan. Most lending institutions offer borrowers a better loan scheme than losing their existing customers. So, get in touch with the finance company and negotiate better interest rates to reduce the EMIs.
These are useful ways for those who want to know how to reduce their home loan EMI. Use them appropriately to chalk out a revised loan plan and make the EMIs more affordable. Use a Home Loan EMI calculator to measure eligibility and apply for a loan amount that best suits the loan requirement without stressing your budget.
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