Borrowing a home loan is a commitment for the life and the borrower feels a lot of burden if not planned properly. While planning to borrow a home loan need a scrutiny of your debts and other expenses. The loan amount of the loan may vary from lakhs to crores and the duration can go up to 20 years. The tenor depends on various factors depending on the eligibility criteria of the lender. So, even a slight fluctuation or a rearrangement can result in huge savings; the borrower only needs to access the right information.
With rising prices in every commodity, we always look for the options to unburden ourselves in some or the other way. This is same with the loan we borrow. When we borrow a loan, we bear many expenses in its initial stage as well as on a later stage but there can be solution that can lead to lowering the cost of the borrowed loan amount. Lets read ahead to get the clear snapshot of how we can lower the cost of our loan:
Choose Shorter Duration
A loan for a shorter duration can be glossed with lower cost by opting to borrow for short terms like 15 years rather than 20 years. Though, the tenor depends on the creditworthiness, age, debts and other factors of the borrower. However, the monthly equated installments (EMI’s) may be higher but the interest towards the complete loan amount will be less. Since the principal amount is repaid on a faster pace and due to lower interest rates, the interest amount to be paid is also low. As we all know that the interest is only paid on the outstanding principal amount of the loan, choosing a lower loan term will be beneficial in terms of interest rates.
Early Repayment of Principal
It is important to make sure that you make systematic repayments towards your principal amount. The repayment should be quick to avoid any higher interest outflow. Any extra amount can also be deposited to reduce the interest on the balance principal amount. Before you take any such step, be careful to discuss with your Bank/ NBFC and take necessary steps to move in the right direction.
Choose to Pay More Than One EMI
A borrower can choose to pay more than one EMI every month to reduce the tenor of the loan as well as the interest cost towards the loan. But this can only happen when you pay conscientious attention to your finances as more than one payment is completely dependent on your steady flow of income after meeting your all other regular expenses and debts. Though, this seems to be an immense burden in initial years but turns to be beneficial in longer term.
Opt to Pay Higher EMI Amount
With every passing year and with significant increase in your monthly income, you can opt to pay higher EMI’s and reduce the interest burden of your loan. The interest amount is calculated on various factors and this also includes the applied and approved loan amount, tenor and also the interest rate that helps to conclude the amount to be paid by paying higher EMI’s.
Choose Balance Transfer to Avail Lower Interest Rates
This is obvious that Banks/ NBFC’s do not reduce their interest rates themselves until the borrower asks them to do so. You can always keep an eye to know the current market status and the available interest rate with different Banks/ NBFC’s. The borrower can ask the lender to provide you with the best available interest rates and in case, your lender refuses to reduce the interest rates, you can search the best available options to avail lower interest rates with a facility of balance transfer.