10 ways to reduce your home loan EMI burden
May 29, 2023
Credit: Pixabay
Compare interest rates online
When taking a home loan, compare interest rates offered by different banks and housing finance companies online and choose the best rate available to you. Also consider any additional fees or charges.
Credit: Pixabay
Maintain a good credit score
When you are taking a home loan, the interest rates are decided based on your credit score and a higher credit score would mean more competitive interest rates. A credit score over 750 is considered good.
Credit: Pixabay
Choose a longer repayment tenure
For a ₹50 lakh loan at 9.5 percent interest rate, the EMI is ₹52,211, if the tenure is 15 years, and ₹46,607 if you increase the tenure to 20 years. However, your interest outgo goes up from about ₹44 lakh to about ₹62 lakh.
Credit: Pixabay
Increase your loan tenure
If you are an existing borrower and your EMI has gone up due to a hike in interest rates, your loan tenure goes up to keep the EMI the same. You may choose this option, but your interest outgo will be higher.
Credit: Pixabay
Re-negotiate interest rate with your bank
If your credit score has improved after you have taken the loan, you should try and renegotiate the interest with your lender and bring down your EMI outgo.
Credit: Pixabay
Refinance your home loan
This basically means taking a new loan from another lender. As a thumb rule, consider refinancing only if you stand to gain at least 50 to 100 bps reduction on your current loan.
Credit: Pixabay
Consider prepaying your loan
If you have enough funds, you may consider prepaying your loan. For instance, a 20-year loan can be repaid in 12 years if you pre-pay 5 percent of the loan balance once a year.
Credit: Pixabay
Make use of overdraft facilities
A home loan overdraft lets you deposit funds into the loan account, over and above your monthly EMIs. The additional funds are treated as home loan prepayment and lets you reduce the interest payout and outstanding balance.
Credit: Pixabay
Invest through SIPs
Investing in systematic investment plans (SIPs) can potentially generate returns that can be used to prepay the home loan, reducing the outstanding principal and thereby lowering the EMI amount.
Credit: Pixabay