Getting a home loan is not a trivial decision; it is one that can have a huge impact on all your other finances. While it is important to list out the best home loan lenders and pick the most suitable one for you, it is also necessary to make sure that the plan you opt for offers you the lowest interest rate possible. A high-interest rate on your loan can leave a dent in your pocket.
Since a home loan is a long-term commitment, it is crucial to take a loan with the lowest interest rate available. On average, a loan last for 10-15 years which means even a slight difference in percentage can cost you thousands in the long run. Below are some tips on how to get the lowest interest rates on a housing loan.
7 Ways to get the lowest home loan interest rates:
Table of Contents
1) Market Research:
This is a no-brainer; if you want to find a low interest home loan, you will have to look for the options available out there. Once you do thorough market research, list out the options that you feel offer the best interest rate. You can then further compare the plans and see which loan plan benefits you the most.
A lot of these options might seem convincing at first, but only a deep dive into the specifications will help you decide which one is the best for you. A home loan is nothing something that should be taken in haste. Take your time to compare the options for as long as you want to before signing up for it.
2) Maintain a good credit score:
Your credit score has a consequential role to play when it comes to any kind of loan. Since a home loan is usually a large sum of money, any home loan finance company depends even more on your credibility. And the easiest way to check someone’s financial credibility is to know their CIBIL. Suppose your credit score is low, the chances of a higher interest rate increase.
The only condition when a lender is going to trust you with a low credit score is if you pay a higher interest rate. The better your credit score, the more you can negotiate with the lender and convince them to give you better plans. You can start working on your credit score a few months prior to applying for the loan by paying your credit card dues on time or before time.
3) Consider increasing the EMI amount:
The higher the EMI amount you pick, the lower the interest rate you will be required to pay to the bank/ NBFC. Or, if you have an ongoing home loan already, an increase in your monthly installments may help bring down the interest rate. If you are earning more now than you used to at the time of applying for the loan, increasing the EMIs could be a good option. Connecting with your lender and revising the plan can help you save money on the interest rate. In cases of ongoing home loans, reviewing your home loan periodically will make sure that it remains the best housing loan for you.
4) Pay it off early:
The best way of escaping the interest charges on your home loan or any loan is to pay it off early. If you have some extra cash at your hand and you are in no immediate need of it, you can benefit from it by making a prepayment for your loan. Early payments can help you get debt free early and therefore reduce the interest rates. Any extra money that you earn during your repayment tenure can be used to pay off your loan early instead of being spent on a new gadget or a luxury item.
5) Save big for the downpayment:
Paying a big downpayment amount initially automatically decreases the remaining amount. You will be charged a lesser interest if there is less repayment amount left. It is therefore suggested to start saving long before you plan to apply for a home loan so that you can go big on the downpayment.
However, also make sure that you keep saving emergency savings with you and not spend the last penny on your downpayment. Pay as much as you comfortably can. Loan repayment should be structured, keeping all the other expenses in mind.
6) Shorter tenure might help:
The sure-shot way of getting the lowest interest rate on your home loan is to opt for a short repayment tenure. Lenders give you the option to pick a home tenure as per your paying capabilities, whether you take up the loan offline or opt for a home loan online apply.
A longer tenure might appear tempting as it means lower EMIs; however, if your budget allows, you should always opt for a shorter tenure. The tenure that you select has a huge impact on the interest rate. You will not realize how much extra you end up paying to the lender in the form of interest rate in longer tenure.
7) Move to a new lender:
The repayment tenures for the best home loans are long. A lot can change in the market in such a long time. If you feel that you are paying high-interest charges on your current home loan and a lot of cheaper options are available out there, consider shifting to a new lender. You can request a balance transfer and get into a new plan for your existing loan with a new lender of your choice. Staying up to date with the options available and shifting to a home loan for you at that time is a wise choice.
The best home loan lenders in the market provide you with various options for a home loan. Pick the one that offers you the lowest interest rate, or strategize your loan plan in a way that you are paying the lowest interest rate in the market.
That can be done by taking up a short tenure period, making a big downpayment, making prepayments against your loan, paying higher EMIs, etc. No matter which option you pick, your sincerity during the repayment tenure defines how early you will be free of debt and how less you will pay as an interest to the bank.