They are afraid this expense will put a huge strain on their financial wellbeing and cause them to default on a home loan.
However, there are numerous ways to prepare for, decrease and save money on your home loan interest rate and this article will discuss a few of them.
To begin with, you must check your credit score. If your score is below 700, then there’s scope for improvement. Start paying your bills on time, don’t exceed the credit limit on your credit card, try using your oldest credit card and make all credit card payments before the due date. Ensure any other debt repayments are made on time.
Doing these things will help you boost your credit rating. Not only will this increase the chances of getting your loan approved but it will also help you negotiate a lowered interest rate. Though the lender might only bring down the rate by a decimal point here or there, this small reduction can help you save loads of money over the tenure of the debt.
Along with working on your credit score, you should build a down payment. The larger the down payment, the lower the amount of interest you pay. This is because the interest payable is calculated on the amount borrowed, the lesser you borrow, the lesser interest you pay.
Another way to get lowered interest rates is to opt for the floating rate of interest. These are normally lower than fixed home loan interest rates. There is a chance they might increase over time but they mostly never go much above the fixed rates. Moreover, the interest rates on a home loan in India are at an all-time low and experts believe that they will fall lower.
Another way to pay less interest is to shorten the tenure of your loan. You can do this by making prepayments or increasing the EMI amount every month. Invest any windfall gains, increments, bonuses and appraisals into your home loan; this will ensure you finish the repayment quickly and pay less interest.
Keep looking out for lowered interest rates. If you do find a better interest rate, you can switch your lender. This will allow you to enjoy lowered interest rate for the remaining amount of your debt repayment. However, many lenders might require you to pay a switching charge, ensure this amount is lower than the savings you can avail by switching your lender.
Save money on your home loan interest rates by using the interest payment of your home loan to save taxes. Under section 24 of the Indian Income Tax Act, you can save up to Rs. 2,50,000 annually against the interest amount paid every year.
These were a few ways to play smart with your home loan interest rates. We hope this article has been helpful and allows you to make the most of your home loan’s interest rate.