Home loans can be a great way to finance the purchase of a home, but the monthly EMIs (Equated Monthly Instalments) can be a significant burden on your finances. However, there are a few things that you can do to reduce your EMIs and make your home loan more affordable.
Increase Your Down Payment
One of the most effective ways to reduce your EMIs is to increase your down payment. The larger the down payment, the less you need to borrow, which means that your EMIs will be lower. A 20% down payment is considered ideal, but even a small increase in your down payment can make a big difference in your EMIs.
Choose a Shorter Loan Tenure
Another way to reduce your EMIs is to choose a shorter loan tenure. The shorter the loan tenure, the higher the EMIs will be, but you will also pay less interest over the life of the loan. A 20-year loan will have lower EMIs than a 30-year loan, but you will pay more interest over the life of the loan.
Compare Interest Rates
Interest rates can vary widely between different lenders, so it’s important to compare rates before you apply for a loan. The lower the interest rate, the lower your EMIs will be. You should also consider the type of interest rate (fixed or floating) that you choose as it can also affect your EMIs.
Negotiate With Lender
You can also try to negotiate with your lender for a lower interest rate or a longer repayment period. Lenders may be willing to work with you if you have a good credit score or a steady income. Having a professional and reliable home loan agent here could help greatly.
If you have extra money available, you can make pre-payments towards your home loan. This will reduce the outstanding principal and thus reduce the interest payable on the loan. But some lenders may charge a penalty for pre-paying the loan, so check with your lender before making any prepayments.
Avail Tax Benefits
You can also avail tax benefits on your home loan. The interest paid on your home loan is tax-deductible under section 24 of the Income Tax Act. You can claim a tax deduction of up to Rs. 2 Lakhs on the interest paid on your home loan.
You can consider co-borrowing with a family member or friend who has a good credit score. This can help you to get a lower interest rate and better terms on your loan.
You can also consider transferring your existing home loan to another lender who is offering a lower interest rate. This is called a balance transfer. By transferring your loan, you can save a lot of money on interest over the loan. However, it’s important to compare the fees and charges associated with a balance transfer before making a decision.
Opt for a Longer Reset Period
Some lenders offer home loans with a reset period, which means that the interest rate on a loan is adjusted after a certain period of time. If you opt for a longer reset period, your EMIs will be lower in the short term, but they may increase in the long term.
Increase Your Credit Score
A good credit score can help you to get a lower interest rate on your home loan. To increase your credit score, you can pay your bills on time, keep your credit card balances low, and avoid applying for new credit too often.
Consider a Flexible Home Loan
Flexible home loans are designed to give you more control over your finances. These types of loans allow you to make extra repayments, take a repayment holiday, or even redraw funds that you have previously paid. These features can help you reduce your EMIs and repay your loan faster.
By following these tips, you can reduce your EMIs and make your home loan more affordable. However, it’s important to remember that a lower EMI doesn’t necessarily mean that the loan is cheaper in the long run. It’s important to consider the total cost of the loan, including the interest, before making a decision.