Paying off a home loan can be a financially daunting journey. However, there are effective strategies to ease the burden and potentially reduce the total cost of the loan. Here are five practical methods to consider:
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Home loan EMI: Check if you can switch loan regime
If you took a home ages ago, before the implementation of the External Benchmark Based Lending Rate (EBLR), you might be paying a higher interest rate than new borrowers. You can approach your lender to request a shift to the EBLR regime. This could result in significant savings as EBLR rates fluctuate with market interest rates.
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If you have a good credit score, ask for lower home loan interest rate
Many borrowers are compelled to take loans at higher interest rates due their poor credit scores. However, if you have diligently repaid your loan and improved your credit score, it is time to leverage the change. You can request your lender to renegotiate the interest rate based on your improved credit profile. Many lenders are willing to offer better rates to borrowers who have demonstrated financial responsibility.
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Can’t repay home loan? Consider extending home loan tenure
Extending the tenure of your home loan can reduce your monthly EMI, providing immediate financial relief. This option is particularly beneficial if you have repaid a substantial portion of the principal and still have room to extend the loan period, such as up to retirement age. For example, extending a loan tenure from 10 years to 20 years can significantly lower the EMI. However, be cautious as extending the tenure increases the total interest paid over the loan’s life.
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Transfer home loan to a new lender for better rates
Interest rates can vary significantly between lenders. If you find that your current lender’s rates are higher than those offered by other banks or housing finance companies, consider transferring your loan. A balance transfer to a lender with lower rates can decrease your EMI and total interest outgo. Be mindful of any transfer fees and compare the costs to ensure the switch is financially advantageous.
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Partial payment can lower your home loan EMI
Making partial prepayments on a floating-rate home loan can significantly reduce the principal amount, thereby shortening the loan tenure. If you prefer to maintain the original tenure, you can request your lender to adjust your EMI amount following a substantial prepayment. This flexibility allows you to manage your loan more effectively and potentially lower your monthly financial obligations.
