There can be various consequences of a high home loan interest rate. This means you need to pay hefty EMIs. So, there is a possibility that after a point in time, you may fail to afford the EMIs anymore. This can lead to the accumulation of debt and an adverse impact on your credit score. This can reduce your chances to get loans in the future. So, here are some tips to avoid these consequences by lowering your home loan interest burden.
Keep a High Credit Score
If you have a high credit score and a good loan repayment history, the lender can find you creditworthy. Then you can get competitive interest rates on home renovation loan, loan against property and more. You can maintain a good credit score by paying credit card bills and loan EMIs on time.
Make a Large Down Payment
If you make a large down payment, you can take a home loan of a lower amount. If the loan amount is less, the interest charged on it will also be less. This way, you can reduce your interest burden right in the beginning.
Make Prepayments
Say, there has been a salary hike or the same is expected soon. You can take an advantage of that to make a prepayment. You can prepay in part or full based on your financial condition. Else you can keep increasing your EMIs by making part payments every month.
When you make a part payment, you can either reduce the amount of your remaining EMIs payable or the remaining tenure. Choose whatever suits you the most. Either way, since the principal outstanding amount goes down, the interest applicable on the same reduces. So, your interest burden is lightened.
Just make sure to learn about any prepayment charges levied by the lender.
Use Your Business Relationship with the Lender
If you have been a dutiful borrower and paid all the EMIs on time, the lending bank may offer you lower interest rates on a loan. That is, if you have a good business relationship with the lending bank, you can always use that to negotiate a better interest rate. Besides this, you can keep an eye on any festive offers in the bank. Nevertheless, a reputed bank provides offers regularly and encourages customers to visit their nearest branches to avail the offer of the day. Similarly, you can try to reduce the loan against property interest rates and a home renovation loan.
Reduce the Loan Tenure
If you reduce the loan repayment tenure, you need to pay the applicable interest for a shorter period. This is another way of lowering the interest burden. When you reduce the tenure, you usually have to pay higher EMIs every month. But don’t worry about that since with short tenure, you can become debt-free earlier.
Opt for a Balance Transfer
This is a great way to bring down your interest load. Look for a lending bank that offers home loans at lower interest rates than that offered by your current lender. In that case, transfer the balance of your existing loan to the new lender and start a fresh loan account there. The outstanding will remain the same but with a reduced interest rate, you can lighten the interest burden and pay lower EMIs.
Once your interest burden is lowered, make sure not to miss any EMI payment. If required, initiate monthly automated transfers of the EMI amount from your bank account to the lender’s account on a suitable date. This can improve your credit score if it was affected previously.