Tips to Decrease Rate of Interests on Housing Loans
Housing loans are huge commitments and the borrower has to give up to half of their monthly income for EMIs for a long time to come. Along with the principal amount, the borrowers have to repay with the rate of interests till the tenure ends. Banks and financial institutions gain from the interest amount and they cannot provide more flexibility on the same.
Decrease Rate of Interests on EMI:
There are some ways in which you can decrease rate of interests for existing housing loans. Even if they aren’t direct and simple, when you follow these few tips you can effectively bring down the interest rates in EMIs:
Prepay the home loan beforehand:
Many borrowers of housing loan prepay the loan amount and there are many ways this can be done. Overall interest rates paid can be brought down considerably by prepaying the loan amount every six months or one year. Banks also encourage prepayment options from borrowers because they get the money back anyway and there are no extra fees or penalties levied on the borrowers for the same. To bring down the interest paid, this is one of the best approaches. Mr.Prakash, who recently bought one of the apartments for sale in Pallavaram, says prepayment works for him to decrease rate of interests on his housing loan.
The way it works is totally different though. For any kind of loan, the interest for the loan is received by the lender from the borrower during the initial stages. The principal amount that is borrowed is only received after the interest is paid back. By prepaying in the starting stages, the borrower will be subjected to pay the lesser amount of interest as it is decreased.
Increase the monthly payments:
In floating rate of interests levied by the bank, the rates are dynamic and keep on fluctuating based on the market scenario. When the rate of interests are reduced based on the market, the lenders smartly keeps the EMIs same and cuts down the repayment tenure or they increase the repayment tenure while decreasing the EMIs.
To take this to your advantage, you should keep the EMI the same or increase it. By doing this, you can bring down the complete expense of interests that is levied to you throughout the repayment tenure and save a lot of money to your favor.
Choose loan balance transfer option:
This idea is totally alien to some of the loan borrowers across the country. This trend is gaining popularity because major lenders (i.e. banks and NBFCs) are ready to snatch borrowers from other lenders. When a borrower is not satisfied with the high rate of interests levied by the present lender, they can choose to change to another lender who accepts a lower rate of interests. For instance, if you have purchased one of the apartments in Pallavaram, Chennai with a loan from a Bank A, and if they levy very high rate of interests, you can always switch to Bank B and continue the repayment schedule with them for lower interest rates.
Even if balance transfers give you the option of lower interest rates, both the present lender and the new lender might require you to pay defined fees for the same. The present lender levies a penalty to process the balance transfer and the new lender levies a new processing fee to allow the transfer. It is highly advisable to scrutinize these charges and see if the transfer is profitable to you.
Also check : How is EMI for Housing Loans Calculated?