A home loan is a feasible option of availing financial assistance when an individual has to purchase or renovate his/her home. In this funding option, an individual does not have to liquidate their savings to avail monetary aid for house purchase. Instead, they can utilise the house property to borrow an amount from their preferred financial institution and reap the benefits offered by them. The procedure for availing a home loan is now easier and less time-consuming. With the introduction of online application methods, the process of availing a home loan sanctioned is fast-tracked.
Although the procedure of availing a home loan from a financial institution has been streamlined, repaying a home loan can strain one’s finances. According to reports provided by Economic Times, the growth of household debts has strikingly increased from Rs. 3.7 Lakh to Rs. 6.74 Lakh between 2017 and 2018. The prime reason for this is missing payment dates and inaccurate calculation of loan installment, etc. In that case, individuals utilize prepayment facilities and estimate their payment amount with a home loan prepayment calculator. Now, take a look at ways you can use to reduce interest payment on an existing home loan.
Factors That Help Reduce EMI Payments:
● Opt for prepayment or foreclosure – Individuals can choose to prepay or foreclose their account for home loans. In foreclosure, the borrower has to repay the entire principal amount in one single payment before the tenor ends. As for partial repayment, the borrower has the provision to repay a portion of their borrowed amount, which would eventually lower their current interest rate.
● Balance transfer facility – By availing this facility, an individual can make a beneficial change to their home loan repayment liability. Through this method, one can pay off his/her interest on an existing loan amount at a reduced rate of interest. It thus reduces their repayment liability.
● Use home loan EMI calculator – A proper estimation of the monthly outflow for loan repayment helps in managing the finances better. A home loan EMI calculator or a home loan prepayment calculator aims at accurately assessing the contribution that it makes for loan settlement and reduces the risk of financial ambiguity.
● Compare the interest rates prevalent in the market – This method of saving on interest is usually utilised before you apply for the loan. Individuals should compare the interest rates offered by various financial institutions and select a lender that offers the lowest rate.
● Maintain a high CIBIL score – With a CIBIL score of more than 750, an individual stands a chance to negotiate the interest rate with the preferred lender. A good credit score reflects the repayment habit of an individual and makes him/her eligible for a lower interest rate on the loan amount.
Loan repayment is an obligation that leads to financial stress for every individual. As for repayment of home loan, it is a long drawn process that generally stretches up to a tenor of 20 years. Before choosing a tenor for their loan repayment, individuals should make an accurate estimation about how much EMI they can afford per month. To reduce the financial burden, customers should look for ways that can reduce their monthly EMI payment with the likes of home loan prepayment rules.
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