Investing in properties is one of the most beneficial investment tips that you will ever receive. Unlike other expensive items, it is an asset that only grows higher in value. Just like a car and other valuable belongings, you have to buy a property on a loan. It is a clever option that can save you from spending a large amount in one go.
The Realities of Home Loans:
However, when you go for a home loan, you automatically go for a big financial rejig. It changes your patterns of expenditure by a big margin. A home loan takes up more than 30-40% of your monthly income. So, you have to consider a lot of things before confirming a loan.
Tips You Can Try for Reducing the EMI Amount:
In this blog, you can find a detailed take on a few useful tips to reduce your home loan burdens. We discuss the ways that can enable you to pay a lower EMI Rate for the loan. Read on to learn more.
- Pay a Higher Down Payment: Contrary to popular belief, paying high down payments can reduce your EMI rate by a huge margin. In a way, the principal amount will be significantly reduced by the amount of the down payment. Though it may seem like a big burden to you at first, it will eventually provide you dividends in the long run.
For example, the principal amount of your house is 70 Lakhs. Now, it will be feasible for you to take a loan with a downpayment of Rs 8 Lakhs. You will need to pay the rest amount through EMI, making the total loan amount Rs 72 Lakhs. Though the final amount may seem a little larger, the loan will help pay off your bills.
- Longer Tenure of Repayment: The tenure of payment and the amount of loan are inversely proportional to each other. This means, if you choose a longer period of repayment, you will be automatically repaying it at a lesser rate of interest. The rate of interest plays a major role in reducing the amount of EMI.
If you are certain that high-paying EMIs are not your cup of tea, you can opt for a longer-tenure home loan. This is a chosen option by various financial institutions too, as they are assured of a steady flow of money from the creditor. This will also work for you if you do not have a problem with flexible interest rates.
- Choose a Loan with Lower Interest Rate: Before choosing a home loan, you should perform your own research. You should visit banks near you and browse the website of different financial institutions to get the easiest loan with the lowest interest rates. It is a natural process; your principal loan amount decreases significantly when you choose a loan with a lower interest rate.
However, before taking the loan, you should not procrastinate about getting the best offer. You will probably miss the best offer for interest and close the deal with a higher interest rate. However, if the difference in interest rates between the two banks is nominal, you might not have to perform too much research. In cases like these, go with the loan that seems the best for you.
- Balance Transfers: Though this form of loan repayment is not that common in terms of house loans, it is an available option that you may try. It is one of the beneficial ways to reduce the total amount of interest. All you need is to transfer your balance to another lender who offers the same rate of interest or less.
However, there’s a catch in this process. You can avail balance transfer only if your primary lender allows you to do so. If there is no such plan, you are not eligible to transfer the balance to another account, no matter how badly you need it. As a creditor, you should calculate the final amount that you have to pay after transferring the balance.
- Pay an Extra EMI: If you are looking for ways to reduce the final loan amount or the tenure, you should opt for this. Many banks offer easy loan opportunities where the creditor can pay an extra EMI each month. Though it may take a toll on your monthly expenditure, you must try paying at least one extra EMI in a year.
When you practise this consistently, your loan tenure will significantly come down. As a result, the outstanding principal amount will also get reduced. However, in the initial months, you may not realise how much it is going to help you. You will pay the dividends in the longer run.
Getting a home loan is a big decision, and you may face some difficulties in paying them through the form of EMIs. However, to ease the pressure, you may follow the tips mentioned here. These will help you to enter your dream home without brooding over the monthly payment.