3 Working Ways to Lower Down the Interest Rate on Your Housing Loan
Posted by Arwind Sharma on December 26th, 2019
Of the total Rs. 22.5 Lakh Crore in outstanding advances as of June 2019, Rs. 11.8 Lakh Crore can be accounted for home loans. This data demonstrates the rising demand for home loan schemes to cater to the housing needs of Indians. Considering these home loans are high-value lines of credit, the interest rate paid on can accumulate to a substantial amount throughout the loan tenor. Consequently, rise or fall in interest rate can cumulatively impact the overall financial burden of an individual immensely if they have opted for a floating rate of interest.
While numerous factors might prevent a borrower from opting for the lowest home loan interest rate while availing for the financial product, there are multiple ways of reducing the payable interest. Borrowers can explore any of the underneath options and effectively save a lot of their finances from paying high interest to their financial institution.
Of the different financial institutions offering home loans, most offers all the underneath options for their customers.
Borrowers, especially if they are self-employed, always have the chance of accumulating a large sum of money. In case such a situation arises, customers can consider making a repayment towards their loan account. This lump sum amount of money can be a portion of the loan amount or the whole of it. While this does not ensure the lowest home loan interest rate for the concerned borrower, it reduces the overall interest paid during the repayment tenor.
Prepayment of the whole loan amount is also known as a foreclosure since it pays-off the loan account before the end of the tenor. However, financial institutions may charge a nominal fee for this facility.
Under this facility offered by different financial institutions, customers of home loans can avail lower interest rates. Of the numerous reasons why borrowers should be choosing a home loan balance transfer, the most crucial is this reduction of the interest rate paid by an individual. Usually, this does not incur any additional charges by the financial institutions through a processing fee going up to 1% of the loan amount that can be levied.
Customers can easily transfer their loan account online. In case they opt for this facility, it is important they calculate their exact expenditure beforehand using a loan EMI calculator. Financial institutions and NBFCs often offer additional credit facilities on balance transfer as well.
Shifting Interest Rate Schemes
There are two types of interest rate schemes that customers must choose from while opting for a home loan. Moreover, in case a customer has opted for a flexible rate of interest on their loan, they can shift to fixed rates or vice versa according to their discretion.
Customers opting to choose this method to avail the lowest home loan interest rate should also be aware of a few other aspects. This primarily includes the fact that while hikes on flexible rates might compel a borrower to shift to fixed rates, they cannot revert back in case there is a rate cut.
It is imperative for customers to work out all the details of their future EMI payments before they opt for any of the options mentioned above. Furthermore, the government of India offers multiple home loan interest tax benefits which can also reduce the overall payable sum. It is crucial that every borrower looks up everything they should know about saving tax when they take a home loan. This especially includes tax saving under Income Tax Act sections 24, 80 EE, etc.
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About the AuthorArwind Sharma
Joined: April 15th, 2016
Articles Posted: 48
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