Applying for a home loan is a significant financial decision. One that may impact all your other financial decisions for a few years to follow. An interest rate of a loan decides what amount you will pay to the lender on top of the borrowed amount. Even the slightest bit of change in the interest rate can make a massive difference in the overall repayment amount. A low-interest home loan automatically implies a lower amount paid to the bank or NBFC for the borrowed money. Choosing a lender that provides you with the best interest rate for your plan is crucial. Picking up the right lender and the right plan tailored to your needs or something close to it can make your experience seamless.
Tips on applying for a low-interest rate home loan
1) Compare the plans
There is only one sure-shot way of landing the best home loan offer for you. Through thorough market research, you will understand the kind of plans available in the market. Studying the available plans deeply and making a list of them will help you reach the one suitable for you. Different lenders provide loans at varied interest rates. While all the offers may seem alluring, comparing all the products is imperative and taking the time to conclude. If you settle for whatever plan is offered to you by the first lender you meet, you might miss out on a perfect plan for you.
2) Go for a Medium tenure.
The longer the repayment tenure of your home purchase loan, the higher the interest charged on it. Those lower EMIs come at a cost. You pay more for the time you buy from the lender as tenure. A longer tenure simply means you pay a large amount of money in interest. So, if you wish to pay less money in the form of interest, make sure you pick up a plan with a relatively shorter tenure. However, a shorter tenure will automatically mean high EMIs. If you have the repayment capacity to opt for a short tenure, you should go for it. Ideally, it is recommended to choose medium tenure as both interest and EMI amounts are relatively low and manageable.
3) Plan with an EMI calculator
If you have never heard of an EMI calculator, it is an online tool for calculating estimated EMIs that you will be eligible to pay. It asks for your income, the loan amount and the tenure you are willing to pay off your loan. The tool then gives you a rough picture of your repayment tenure, i.e. how much money you will be required to repay in the form of EMIs against your loan. You can use this calculator to your advantage and plan the tenure according to your paying capacity. You can further apply online for the home loan too.
4) Prepayments can be a game changer.
Do not underestimate the effect of making prepayments against your loan. It can help take the burden off your shoulders significantly. For instance, if you have received your yearly bonus or have earned a decent cheque from your side hustle, instead of splurging that money on lavish goods, you can make prepayments against your loan. These prepayments can help reduce the lent amount, impacting the interest rate on the remaining amount. You can even free yourself from debt before your tenure time through prepayments.
5) Make a decent downpayment.
If you have enough savings to make a massive down payment, do it without a doubt. This step guarantees the cheapest home loan. Do not use your emergency funds for it; however, you can invest the money you know will not be of immediate use. A bigger downpayment will automatically decrease the size of your EMIs. And further, you can opt for shorter tenure to ensure you are paying the lowest interest rates to the lender. Making as much down payment as possible can make the loan tenure seem effortless to you.
6) Revise your EMIs annually
The best home loan lenders, like some banks or NBFCs, provide an option to revise the EMIs annually. Depending upon your repayment behaviour, you can get in touch with your lender and increase your EMIs to move to a lower interest rate. It will be ideal when there is an increase in the borrower’s salary or their business has started doing better. If you know that your income has increased from what it was when taking the loan, it will be best suited for you to get your EMI revised. You will no longer be required to pay an unnecessarily high-interest rate for a more extended period if you do so.
7) Consider refinancing
Suppose it has been a while since you have taken up the loan, and now you come across plans in the market that offer less interest home loans for the amount you are left to pay. In this scenario, you can consider a balance transfer. A home loan balance transfer is switching from a high-interest paying plan to a lower interest paying plan. While it is an excellent option for lowering the interest rate on your ongoing loan, you will also have to be cautious with it. Any miss in the repayments on a balance transfer can invite a high penalty. Only refinance the loan when you are certain you will be able to make each repayment on time.
The best home loan lenders do not take their customers for granted. They understand that a well-planned home loan will not only help the borrower save money in the long run but also ensure they are living peacefully with the funds borrowed. By carefully choosing a lender and making an informed decision, you can make your financial life easier and happier by ensuring that you avail of the best housing loan. If you are planning to buy a home, it is important to consider the various options available. You need to consider the aforementioned tips as they will assist you in getting a better deal over time.