Home loan EMIs play a vital role in deciding if a housing loan is affordable or not. However, it must be noted that several factors tend to influence EMIs and in turn influence a borrower’s repayment capability. For example, loan amount, interest rate, tenor, applicant’s eligibility, prepayment of the advance, etc. influence instalment amount to a great extent.
Interest rates are one of the typical factors that contribute significantly to determining the loan instalment amount. Recently, the RBI decided to slash the repo rate by 40 bps, which can work in favour of borrowers through reduced consumer lending rates.
There are a few practical ways to manage EMIs and lower the burden of the same successfully. Doing so, borrowers can repay their loan and can manage their finances more efficiently.
Tips to Lower Home Loan Instalment Amount
By following these five effective tips, one can conveniently reduce their housing loan EMIs.
- Pick a longer tenor
One of the most effective ways to lower home loan EMI is by selecting a longer loan tenor for repayment. It must be noted that an extended tenor divides the loan liability into more number of months, which directly pushes down the EMI amount.
Typically, leading financial institutions come with a flexible loan tenor, which often extends up to 20 years. Depending on one’s repayment capability, one should pick a tenor that makes repayment more manageable. Consequently, individuals can use a reliable home EMI calculator to select a tenor that helps identify an EMI which matches their repayment capacity.
- Make a higher down payment
Typically, a home loan borrower has to make 15% to 20% of the property’s purchase price as a down payment. However, individuals have a choice to make a higher down payment than the standard amount. It directly lowers the principal amount, and in turn, reduces the EMI amount. It also helps keep a check on interest payable on the sum borrowed.
Also, the lower the loan availed as against property value; the better is the chance of securing attractive features and benefits, mainly because of the low-risk aspect. For instance, borrowers who make a higher down payment carry a better scope of landing a quick approval and negotiating for lower home loan interest rates.
- Opt for a balance transfer
Existing home loan borrowers can lower their home loan instalment amounts either by negotiating with their current lender or opting for a balance transfer. Regardless, such a move will prove most effective if the new lender levies a lower rate of interest and requires borrowers to pay nominal fees for such a transfer.
Notably, borrowers should weigh the pros and cons before choosing a home loan balance transfer to plan its use accordingly.
- Choose to prepay
One of the most effective strategies to lower home loan EMIs and interest burden is to prepay the loan amount. The timing of such payment is also crucial in enabling one to save more. Early prepayment of your home loan has more benefits than prepaying late in the tenor.
Nonetheless, to make the most of such an approach, individuals must select a lender who does not levy a high prepayment charge or penalty on the same.
Subsequently, they should find out the outcomes of defaulting on their home loan EMIs to take necessary precautions. Some financial institutions are quite transparent when it comes to different loan charges.
They also extend benefits like pre-approved offers to customers to enhance their loan availing experience. Such offers accompany several financial products like home loans and loans against property. Check your pre-approved offer in a few simple steps by just entering your name and contact details.
Also Read: Steps to Lower the Housing Loan EMI
- Compare lending institutions
One of the simplest things that individuals can do to avail a home loan at a low EMI is through comparison. Individuals should check different financial institutions and their EMI options. However, one must not choose a lending institution entirely because of the EMI feature.
Individuals must also review other features, benefits and terms of service that accompany the loan option. Once all these things are factored in, individuals can compare the offerings of different financial institutions and make an informed decision.
Besides these, individuals should also consider revising their EMIs annually, if possible. It is often recommended that with an increase in income, borrowers also increase their EMI amount. Other than that, individuals should also take steps that help improve their overall credit history to avail exclusive features and benefits in addition to low home loan EMIs.