8 Smart Ways to Reduce Your Home Loan EMI

8 Helpful Ways of Reducing Your Home Loan EMIs

Bringing down your home loan EMIs helps you free up your finances for other obligations. Here are some easy ways to go about it. 

Research and Compare Lenders

With numerous lenders offering home loans at competitive terms, researching and comparing offers is essential in ensuring that you choose the best one. This is also where a home loan EMI calculator comes into play. 

Available online for free, you can use this tool to gauge the borrowing costs based on different loan terms and choose accordingly. For lower home loan EMIs, choosing an offer with lower interest rates is the best way to move forward. 

While researching home loan lenders, look at the lender’s reputation, processing fees, and other costs associated with the loan. Check all the terms and conditions to avoid hidden costs that can drive up your borrowing costs.

Choose a Longer Loan Tenure

Your home loan repayment tenure affects your monthly instalments. With a longer tenure, your EMI decreases as the number of instalments increases. However, with a longer repayment tenure, your overall interest payment can increase as you pay interest over a longer period.

On the other hand, a shorter tenure results in a higher EMI amount but lowers your overall interest. The best way to navigate this is to use a home loan EMI calculator to find the shortest tenure that offers you a manageable EMI amount. 

Maintain a High Credit Score

Keeping your credit score healthy is another factor that can help reduce your home loan EMIs. As a determinant factor of your creditworthiness, your credit score impacts the home loan terms you get. 

With a higher credit score, the lenders consider you a trustworthy and low-risk borrower. This makes you eligible for a home loan at an affordable interest rate. This, in turn, results in manageable EMIs and low borrowing costs.

Most lenders consider a credit score of 750 or above as ideal. Your credit score is based on the following:

• Your credit history
• Your repayment pattern 
• Your experience with different types of credit
• Your existing debt 
• Your credit utilization ratio

To boost your credit score, make timely repayments, maintain a good debt-to-income ratio, and limit your credit utilisation. 

Negotiate for a Better Rate

With a good credit score, home loan lenders view you as a safe borrower. As such, your negotiation power increases. You can utilize it to get favorable repayment terms and other benefits. 

Here are some points that can help increase your negotiation power:

• Showcase all sources of income 
• Maintain a positive relationship with the lender
• Provide proof of income and employment

Plan to Make Prepayments

Home loan lenders offer part-payment and prepayment facilities. This refers to repaying a part of your home loan in advance. By making a prepayment, your principal amount reduces. This can help you repay the loan earlier than expected, reducing your borrowing costs. 

Prepayments also help reduce your monthly instalments. A lower monthly instalment decreases your financial burden, providing you with more financial freedom. As such, making an extra home loan payment whenever possible can be beneficial. 

However, some home loan lenders may charge a fee for allowing you to make a prepayment. So, assess this cost against the amount you save to ensure that the move is actually beneficial for you. You can check this cost while applying and plan for prepayment from the very start.

Make a Higher Down Payment

Making a larger down payment can significantly lower your home loan monthly instalments. This is because a higher down payment reduces the amount you borrow. Since EMI payments are calculated on the principal amount, your EMIs will be lower too. 

Moreover, a lower loan amount can result in affordable interest rates, making your EMIs more manageable. 

Avail a Pre-Approved Personalized Offer

A pre-approved home loan offer can greatly reduce your monthly instalments. Lenders roll out such an offer after assessing your credit profile and ensuring you are a low-risk borrower with high creditworthiness. 

As such, you can get more nominal home loan rates. These lower interest rates directly translate to lower monthly home loan instalments. 

Opt for a Home Loan Balance Transfer

By switching your home loan to a new lender who offers you a lower interest rate, you can lower your EMIs. This helps you repay easily while saving more. However, before choosing a new lender, compare various lenders and use the home loan balance transfer EMI calculator. 

You should also assess the home loan balance transfer cost with the amount you stand to save. This can help you understand whether the option is feasible and the best time to opt for it. Usually balance transfers are more efficient in the first half of your home loan’s tenure. 

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Implementing these methods can significantly help reduce your home loan’s monthly instalments. By lowering your home loan EMIs, you can achieve financial stability and save money in the long run.