According to a recent report, the period from December 2020 to January 2021 witnessed a 200% year-on-year increase in loan disbursals. This data implies that there has been a significant surge in home loan applications in recent years. While a home loan can help fulfil the dreams of all those looking to own a house, they might burden borrowers financially. So, here are some tips to reduce home loan EMI.
Making Partial Pre-Payments
Every financial institution allows an individual to make partial pre-payments on a home loan in India. The number of partial pre-payments, however, varies from one financial institution to another.
Making partial payments would help to ease the financial burden by allowing borrowers to repay their principal amount faster.
Extending Loan Tenor
As already mentioned above, a shorter tenor would lower the overall payable interest but would lead to higher EMIs. On the other hand, opting for longer tenors would increase the overall interest to be paid but would lower home loan EMIs.
A home loan EMI calculator is a user-friendly tool that helps calculate home loan EMIs within seconds, allowing a potential borrower to make an informed decision regarding home purchase.
Reduction of home loan EMIs would help a borrower manage the EMI payments better and be more punctual towards them. Being responsible would also enable borrowers to avail several offers from financial institutions in the future.
For instance, financial institutions provide pre-approved offers, which help in simplifying and accelerating the loan application process. These offers are provided on various financial products like home loans, loans against property, and more. You can check your pre-approved offer by providing a few details such as your name and contact number.
Opting for a Higher Down Payment
Home loan lenders finance up to 80% of the property’s value, leaving 20% of the remaining amount for the borrowers to contribute in the form of a down payment. However, it is wiser to make a higher contribution towards the down payment instead of opting for a low amount.
This is because the greater the contribution, the lesser will be the LTV ratio and the required loan amount. This would, in turn, enhance a borrower’s home loan eligibility and increase the loan approval chances.
Increasing Home Loan EMI Amounts Annually
Several financial institutions offer to increase the EMI amounts if a borrower has availed a loan on floating home loan interest rate in India. One can choose this option ideally when there an annual increase to one’s salary. An individual would be able to pay off a loan faster than the designated EMI system and tenor by opting for this facility.
Re-negotiating the Interest Rate
In several instances, existing borrowers do not have an idea regarding lower interest rates and cut down on the base rates. The interest rate will remain the same throughout the tenor if an individual has acquired a loan on a fixed interest rate. However, a borrower who has acquired a loan based on a floating interest rate is eligible to avail changes in the interest rate based on the most recent revisions made by RBI.
One must always maintain a good relationship with the lender. This way, one can opt for negotiating the service terms of a loan which would help avail low rates of interest on the loan amount.
Since you are now familiar with the various ways to reduce your home loan EMI, plan accordingly to meet all your housing and other financial goals.