Step-By-Step Guide: How To Reduce Your Home Loan EMI

Home loan EMI- Housing finance is one of the most popular types of personal credit worldwide, and it is expected to remain prevalent with the increasing demand for residential spaces.  In a recent study shows that the home loan market in India is expected to witness a growth rate of 22% (CAGR) between 2021 and 2026.

This growth can be blame to growing social process and low housing loan interest rates.

Additionally, the government’s policies aimed at promoting affordable housing are driving the growth of housing finance. However, owing to the recent market conditions, a growing number of individuals are seeking respite from their loan repayment burden. In this article, we discuss the different ways in which you can reduce home loan EMI.

The EMI payments on your home loan comprise two components – the principal amount and the interest amount. It is important to plan your home loan in a manner that you pay the minimal possible interest in order to reduce home loan EMIs. Listed below are some of the ways to keep your EMIs to a minimum to ensure a comfortable payment schedule on your home loan.

Step-By-Step Guide:

Choosing a Low Interest Rate, You Can Reduce Your Home Loan EMI

There are two ways to opt for a loan with a low interest rate. One of them is to avail your loan at a time when market interest rates are at the lower end of the spectrum. For instance, the current housing loan interest rates are at their lowest levels in over four decades, and homebuyers can avail home loans for as low as 7% annual interest. Thus, it is a good time to take a home loan right now.

The second way to avail low interest home loans is by choosing the right type of loan. Compare the interest rates of different lenders before finalising on one to ensure that you get the best interest rates. Moreover, conduct thorough research on the type of loan for a lower interest rate.

For example, if you currently have a home loan that’s based on the MCLR (Marginal Cost of Funds based Lending Rate), an expected drop in the MCLR will allow you to keep your EMIs lower than if you switch to a loan based on the RLLR (Repo Linked Lending Rate).

Thus, ensure that you know both types of rates to gain the maximum benefit from your home loan. You should also check the documents required for a home loan before applying for it, as it will help you get a quick disbursement at your preferred time.

Pay a higher down payment

Making a large down payment will lower your due principal amount. Consequently, the interest payment calculated on the principal will be low as well. This automatically results in lower EMI payments. Thus, a higher down payment is beneficial in terms of future EMI payments, especially in long tenure home loans.

Choose a longer tenure

With long loan tenure EMI amount will be increased as well as the total interest amount in the long run as it will be charged over an extended duration.

This is a feasible option for those who prefer making smaller monthly payments, even if the total amount paid on the loan is higher.

Making prepayments

A good way to keep your EMI payments in check is to make an early prepayment on your loan. If you have money or want to pay part prepayment, So it is good for you to reduce your home loan EMI.

Negotiate with the lender

An often-ignored way to reduce home loan EMIs is to negotiate your existing loan with the lender. If you have a strong financial standing and good repayment behaviour on your loan, so it can be done. Your lender might agree to decrease your interest rate, resulting in lower EMI payments.

Balance Transfer Home Loan 

A balance transfer on your home loan is a facility that allows you to transfer the outstanding amount of your existing home loan to another home loan with lower interest rates offered by a different lender. If you’re eligible for a home loan balance transfer to a lender offering better interest rates, you might be able to reduce home loan EMIs.

However, it is imperative that you check whether the savings with a balance transfer outweigh the costs. You can calculate your potential savings with a home loan balance transfer calculator.

Summary

In conclusion, there are various ways in which you can reduce home loan EMIs, such as opting for the lowest home loan fees and interest rates, making a high down payment, choosing a long loan tenure, making prepayments on the loan, negotiating with the lender and availing home loan balance transfer facility.

It is also important that you calculate EMIs on a home loan by using a home loan calculator before taking any decision.