5 Helpful Suggestions to Reduce the Burden of Home Loan EMIs
According to the report, ‘How India Lends-FY21’, India’s home loan portfolio raised 32% in origination by value and 15 % by volume between FY17 and FY21. While these statistics portrays the admiration of this credit instrument, prospective borrowers need to have robust repayment planning to clear this debt without any hiccups.
In this regard, they can also follow some handy tips to lower their home loan EMI burden and chalk out their finances accordingly.
5 suggestions to reduce a home loan EMI
- Higher down payment
If not directly, the down payment also plays a vital role in determining the home loan EMI. Since financial institutions offer a percentage of a property’s market value as a housing loan, one needs to arrange the rest as a down payment.
For instance, if a property has a market valuation of Rs.1 crore and a lender offer 75% LTV, you will get a loan of up to Rs.75 lakh, and the rest will be a down payment.
Therefore, a higher down payment will lower the principal loan amount and thus reduce monthly instalments as well.
2. Longer repayment tenor
Individuals can enjoy repaying their home loans over an extended period ranging up to 30 years. Additionally, a longer tenor also reduces the EMIs and makes it affordable for the borrowers. However, the total interest payment increases with a longer tenor. Hence, choosing an extended repayment period requires proper planning considering all the financial commitments.
Before choosing a repayment tenor, borrowers need to learn how to calculate home loan EMI. In this regard, they can take assistance of an online calculator. This calculator provides accurate results on total interest payable and monthly EMI. Based on their affordability, borrowers can increase or decrease tenor and find one that suits them.
3. Prepayment of the loan amount
One of the many ways to reduce home loan tenor and EMI is through prepayment. Individuals can use their sudden inflow of money such as a raised salary or bonus for this purpose. Prepayment influences the principal loan amount directly, decreasing the monthly instalments.
4. Shop for the best interest rate
The interest rate on a home loan has a directly proportionate relation with EMIs. Hence, with a higher interest rate, monthly instalments also become expensive. However, this interest rate is not a uniform one, and varies from one lender to another. Hence, it is vital for potential borrowers to compare rates from different lenders before finalising one.
A point to learn here is that, lenders finalise the applicable interest rate after evaluating the home loan eligibility of applicants. Hence, fulfilling these lender-specific eligibility criteria and submitting home loan documents in order also help to secure the most competitive interest rate.
5. Balance transfer
Another notable way to reduce home loan EMIs is through a balance transfer. Individuals can opt for a home loan refinancing if another financial institution provides lower interest rates and additional benefits. But before opting for a balance transfer, one needs to know how a home loan balance transfer works.
To make this home loan balance transfer process hassle-free, one can also opt for a financier extending pre-approved offers. These offers expedite the loan application process and save time. They are available in financial products like LAPs, home loans, etc. Individuals can now check their pre-approved offers by submitting contact information.
These suggestions mentioned above may help individuals to lower their EMI burden. With a reduced home loan EMI, one can easily avoid default on repayment and pay as per their capacity without excessive financial stress.
Additional Read: Learn in Detail how your Home Loan EMI is Calculated