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6 Effective Tips To Reduce Your Home Loan EMI

6 Effective Tips To Reduce Your Home Loan EMI

With the number of lenders offering the simpler housing loan eligibility criteria, it is easier to avail of a housing loan in India today. However, before you begin the process of availing of housing finance, it is important to take the note of home loan interest rate, so that you don’t end up paying a hefty amount as repayment. Paying a large sum as your home loan EMI is not the pocket-friendly, as it ties up your income each month. 

Good money management and the loan planning is key to keeping your EMIs in check. While securing a low home loan interest rate is one way to reduce home loan EMI, there are other ways to achieve this and pay off your debt more easily too. Read on to know more. 

Opt for lender with a nominal home loan interest rate

It pays to do your research when it comes to home loans. Read the financial papers online or offline to see the current rates and choose a lender who offers the most competitive home loan interest rate along with other value-added features. Many Lenders are now offering rates starting at just 6.75%, and a low rate can help you reduce then home loan EMI right from the start.

Increase your home loan eligibility to get the best housing loan interest rate 

You can always negotiate with your lender for better interest rates, especially when you meet all the home loan eligibility criteria set by them. Usually, a good CIBIL score, a stable job or business and a low FOIR can help you get the most competitive home loan interest rate from a lender. Fixed Obligations to Income Ratio (FOIR) refers to how much income goes towards your fixed obligations such as rent, existing loan EMIs, etc. Lenders check this to see if you can repay the home loan on time and keeping it to below 40% is the best way to increase your home loan eligibility and secure a low rate of interest. This helps you to lower your EMI. 

Save up for a higher down payment

While lenders can finance up to 80-90% of the market value of the property as a loan (known as loan-to-value or LTV ratio), that doesn’t mean that you should avail the whole amount. Instead, pay a down payment as high as possible so that you increase your home loan eligibility, reduce the principal borrowed and get a lower home loan interest rate.

Both, the lower loan amount and the nominal rate helps to reduce your home loan EMI. 

Part-prepay to reduce home loan EMI

Remember that as an individual borrower on a floating interest rate, there are no prepayment charges for a home loan in India. So, when you have windfall gains or excess money in your account – by way of a bonus at work, sale of assets, or due to maturing investments – make a part-prepayment. This amount is paid in addition to your regular EMIs and goes towards to reducing your home loan principal. Thus, it helps you lower your subsequent EMIs. 

Refinance your home loan 

If you think that your current lender is charging you an interest rate that is higher than others or compared to other current rates, you can always refinance your loan. Carrying out a home loan balance transfer to a new lender who charges a lower home loan interest rate can reduce your home loan EMI for you and also help you to get a top-up loan. However, take note of the charges incurred and calculate your expenses accordingly. This way you’ll know whether it’s worth refinancing your loan. 

Make smart investments to offset your home loan

Plan your finances well. As you reduce your home loan EMI amount by following the steps above, you can make the investments and build your wealth simultaneously. The payouts you receive can then be used to make part-prepayments towards the loan to reduce home loan EMI. What’s more, over time, you can build a corpus high enough to foreclose your home loan and become debt-free faster. 

Keep in mind that while you can also reduce home loan EMI by extending the tenor, this will result in a more expensive home loan as it increases the total interest you pay. So, use the other methods listed above instead. 

A lender you can consider taking a home loan in India from at interest rates starting from 6.75% is Bajaj Housing Finance Limited. This Home Loan also has a hassle-free loan application and approval process, offers an interest subsidy under PMAY, and gives you a Digital Sanction Letter soon after approval for more convenience in property purchase. To take the steps to reduce home loan EMI by way of a home loan balance transfer or to opt for an affordable loan as a first-time borrower, apply online.

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