During the 3rd quarter of 2019, home loans witnessed a 14% growth year on year. Quarter on quarter development of these loans was reported at 3.5%. There is a large influx of first-time home buyers availing loans in between 2018-19. However, every new home loan borrower needs to consider the repayment schedule and plan their finances accordingly to avoid missing EMIs and defaulting on the loan.
Your EMI payable is subjected to interest levied by the lender sanctioning you the loan. The use of an EMI calculator enables you to plan your loan repayment accurately.
Owing to this measure, the borrowers look for a reasonable and cost-effective option in case their home loan repayment schedule is becoming financially cumbersome. A home loan balance transfer, extended tenors, part prepayment, etc. are some of the viable options for existing borrowers to avail of reduced interest rates.
Reducing interest rates with a home loan balance transfer facility
The borrower can switch from his/her present lender to avail more beneficial terms on their home loan. The process starts when the new lender repays the current balance amount to the original lender. Subsequently, the new home loan account becomes active and the borrower starts repaying the balance loan amount as per the new terms.
However, before opting for the facility the borrower should know the following about home loan balance transfer-
- Lower Interest Rate –
Borrowers must ensure that the new lender provides a comparatively lower rate of interest. This will decrease the EMIs, leading to more monthly savings. If not, opting for a balance transfer becomes unreasonable.
Lenders provide home loans based on the reference rate or benchmark rate as applicable. Consumers must make a comparison of the offers before deciding on a home loan takeover.
- Loan Top-Up –
If you need extra funding over your existing home loan, you can avail a top-up loan. Select a lender who provides this financing facility upon availing a balance transfer. These loans are unsecured and are offered at low-interest rates in comparison to other such unsecured loans. You will not be required to provide any additional documentation to avail this loan.
For more convenience, use a home loan transfer calculator to optimally arrange your finances for the new repayment schedule.
– Other Ways to Reduce Home Loan Interest Rates
In case you are about to avail a home loan, here are a few things you can do to reduce the total interest or the applicable interest rates.
- Avail the Loan With a Lower Tenor
Lower tenors increase the loan amount but lower the overall cost of the loan. Also, availing a loan for a shorter tenor may compel the lender to offer the loan at a lower rate of interest.
However, it is important to consider that you may not be able to avail a lower tenor as per your necessities. As it will increase the EMIs, the lender will consider your monthly income before offering you such a tenor. It is essential to know how much loan EMI you can afford to understand the lowest possible tenor you can apply for.
- Part Prepayment
This facility can be availed when you have access to additional income or funds. You can utilize the funds to make the part-prepayment, where you repay an equal amount of the principal.
Prepayment helps you repay a certain portion of the principal and avoid the interest on it. After you prepay, you may have the option to reduce the EMIs or the tenor or both.
You can use an online home eligibility calculator to assess the home loan you can avail from the HFC.
Refer to the above-mentioned steps to reduce the burden of high EMI payment. In case you choose to opt for a home loan balance transfer, review the terms and conditions under the new lending organization.