Getting a house that you could call your own is a dream of many, but not everybody gets to accomplish it. The reason is the lack of funds. Not everyone can manage their daily expenses and expenditures to save enough money and renovate, rebuild or construct a new house with their monthly earnings. This is where housing finance comes in. However, everyone seeks to meet the requirement of a home loan interest rate suitable to pocket.
Home loans are a boon that help individuals accomplish this lifelong dream of getting a place of their own. When one goes for a home loan, he gets access to fulfilling a dream.
Applying for a home loan is also very easy and can be done online. You can deduce the loan tenure and amount by checking the EMI and eligibility online. The loan is repaid in monthly EMI’s, and everything goes smoothly if performed with sincerity and adherence. The only thing you must take care of is the interest rate applied to your borrowed amount. Interest rates directly impact the cost of your loan, and thus, here are a few tips that you may consider to get lower home loan interest rates.
- Maintain a Good Credit Score
The first and the foremost tip that you must consider to lessen your interest rate is to have an excellent CIBIL score. CIBIL score is not a mere value but proof of your creditworthiness. The credit score ranges on the scale of 300-900, and a credit score above 700 is required for a home loan applicant by most lenders. The higher your credit score, the chances of your loan application getting approved increases and the interest rate charged decreases.
- Opt for Shorter Tenures
When you choose to go for shorter tenures, your EMI increases and the probability of your interest rates increasing due to market fluctuations decreases. Generally, home loans can be as long as 30 years, but you will be saved from paying high-interest rates if you choose to keep them short. Using a home loan EMI calculator, you can understand the relationship between tenure and interest rate. Going for long terms charges a high-interest rate over time, and you sink deeper into the interest rate trap.
- Maintain a low debt-to-income ratio
Try to ensure that your existing EMIs including credit card EMIs are less than 30% of your monthly income before applying for a home loan. If this ratio is more than 60%, the lender may reject your application. A lower debt implies a better repayment capacity and thus allows you to negotiate lower interest rates. Use a home loan eligibility calculator to know the maximum amount you can get based on your repayment capacity. If you need a higher amount, or if you already have existing debts, add a family member with a stable income and good credit score as a co-applicant.
- Go for Prepayments
If you recently got a bonus or an increment that you didn’t expect at any time during the loan tenure, then go for partial-prepayment. Partial prepayment enables you to use any extra income you come across towards paying off your loans faster, apart from the usual monthly EMIs. Even if you try to pay 1 extra EMI per year, it could go a long way towards saving on the overall interest payout and pay off your loan faster.
Read More: How to Apply for Housing Loan Online
- Compare Interest Rates Online
The last tip must be your first step while searching for home loans. Various lenders offer variable interest rates on the loan amount you choose. You must search and find out the best lender that offers the best interest rate. You can check interest rates online from the comfort of your home to choose the best accordingly. You must also look for various charges the lender asks for, like processing fees, insurance, etc.
These were the top 5 tips that will help you lower your home loan interest rates. You must consider all these points before and after applying for a home loan online for an outstanding experience.