Even if you have sufficient funds, it is advantageous to take a loan due to the several tax benefits available. Given below are some ways to reduce your overall home loan interest rate:
Higher Credit Score – The credit score reflects your ability to repay your loan, and a credit score of over 750 is good. This would assure lenders that there will be hassle-free repayment, and they will offer a loan at lower interest rates. Improve your credit score by making timely payments and being aware of the money you owe and your credit history.
Larger Down Payment – Making a larger down payment means you can avail of a smaller home loan and, therefore, lower interest rates. Most financial services offer 75-90% of the property value as loans. Plan your purchase to avail of a lower amount of loan.
Compare Interest – Study loan schemes offered by different banks and financial organizations. There are also websites available online which will help you compare the interest rates on offer. Have a clear picture of what is available, and opt for a loan that will charge you lower interest rates.
Decreased Tenure – Longer loan tenures mean lower EMIs, but you will end up paying higher interest. Opting for a shorter tenure may mean higher EMIs, but lower home loan interest rates.
Floating Interest – Usually 1-2% lower than fixed rates of interest, a floating interest rises and falls as the market fluctuates. This is appealing because even if the rate increases, these are temporary conditions that will not affect the total tenure.
Prepayments and EMI Revision – A prepayment will reduce the overall principal and interest amounts. As and when you get sums of money, use these as prepayments on your loan. Also, with salary hikes or income increases, you can revise your EMIs, which will significantly reduce the interest rates.
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