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The maximum home loan repayment tenure also depends on the applicant’s retirement age among other factors. Home loan EMI depends on three factors — principal amount, rate of interest, and tenure of the loan.
New Delhi: Having a home of one’s own is a dream for most Indians. In India, banks offer home loans up to a tenure of 30 years. The maximum home loan repayment tenure also depends on the applicant’s retirement age among other factors. Home loan EMI depends on three factors — principal amount, rate of interest, and tenure of the loan.
SEVEN IMPORTANT TIPS TO REDUCE THE INTEREST PAYABLE ON YOUR LOAN
- Keep loan tenure short: Home loan tenure is one of the three primary factors that determine how much interest you would pay on your loan amount. In many cases, people take home loans for a longer tenure to reduce the monthly EMI payable, however, in the long run, you end up paying more interest. In order to avoid that mistake, before you apply for a home loan, select the loan tenure carefully so that you don’t end up paying higher interest against your principal amount.
- Prepay or part pay your loans whenever possible: In most cases, banks and NBFCs do not charge prepayment or loan foreclosure charges on floating interest rate home loans. Hence, whenever your financial conditions are stable, you should ensure that you make prepayments towards your loan if it’s based on floating interest rate. A large chunk of your home loan EMI goes towards interest payment during the first few years. Making frequent prepayments will substantially reduce the principal amount and there by, the interest amount too. However, you are advised to check with your lender if there are any prepayment charges before taking the loan
- Compare home loan interest rates: It’s very important that you compare the home interest rates and the other terms and conditions by various lenders and not do it in a hurry. Remember, buying a property or constructing one, is a long term investment and you don’t want to lose out on your hard-earned money just because you didn’t pay much attention to all the options in the market. There are several third party websites that help you compare the interest rates and other details offered by different banks on a single platform.
- Home loan balance transfer for lower interest rates: There are lenders who offer loan transfer facility for those individuals who have already taken a loan and started making prepayments against it. Loan transfer facility is nothing but one lender, say X transferring your loan amount from another lender, say Y, to itself. You will have to then make the repayment towards lender X. To woo the customers into doing this, the lender X may offer a lower interest rate than lender Y. However, you should also consider the loan transfer charges that may be applicable during this process.
- Pay more as down payment: Banks and NBFCs offer loans up to 75 per cent to 90 per cent of the total value of the property and whatever the remaining amount is, you will have to shell out of your own pocket. It’s always good to finance the maximum from your pocket and reduce the principal loan amount. As the principal loan amount reduces, it further reduces the overall interest payable on the home loan
- Maintain a good credit score: Lenders prefer customers who have a good credit score. The chances of you getting an upper hand while negotiating on the interest rates with the lender is higher if you have a good credit score. If your credit history is not good, lenders may find you less trustworthy when it comes to your habit of repayment of loans on time is concerned.
- Increase your EMI: If your lender allows you to revise your EMI rates annually, you should opt for a higher EMI as your income increases. Increasing the home loan EMI will reduce the tenure of the loan and therefore the interest payable against your home loan will also come down substantially. You need to check with your lender whether they provide such a facility or not.
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