How can borrowers reduce home loan EMI payment amount?

Lowering your home loan EMIs can make your monthly budget easier to manage. By using some simple strategies, you can reduce your payments and save money. In this article, you’ll find easy steps to help cut down your home loan EMIs, making your payments more affordable and saving you money in the long run. Learn about options like refinancing and changing your loan term to make your home loan payments fit better into your budget.

See also: What are your options if you default on your home loan EMIs?

Switching to a new lender

Switching your home loan to a new lender can help you lower your monthly payments. Here’s how it works:

How it helps

• Lower rates: New lenders often offer better interest rates, which means lower monthly payments.
• Shorter term: A lower rate can also let you pay off your loan faster, reducing overall interest costs.
• Extra perks: You might get better repayment options or additional benefits with a new lender.

Before you switch

• Check if there are any costs for transferring your loan.
• Be aware of any penalties for paying off your loan early with your current lender.
• Gather all required documents for the transfer.
• Look at different lenders to find the best deal.

When it’s worth considering

• If interest rates have dropped since you took out your loan.
• If you’re not satisfied with your current lender’s service.
• If you need more flexible repayment options.

Keep a strong credit score

Having a high credit score helps you get better loan offers in the future. Pay your home loan and other debts on time to keep your credit score healthy. This is especially useful if you think about refinancing or need extra funds later.

A high credit score, especially above 750, can help you get lower interest rates because lenders prefer customers with good credit histories. Tailor your strategies to fit your financial situation, and seek advice if needed to handle high-interest rates and maintain financial stability.

Prepayments and part-payments

Prepayments

Extra payments made on top of your regular EMIs to pay off the loan principal faster.

Part-payments 

One-time payments towards the principal, in addition to your regular EMIs.

How they help

Reducing the principal lowers your remaining balance. Smaller principal means lower monthly payments. Paying off the principal faster shortens the overall loan period. A shorter term means less total interest paid.

Advantages

You can pay off your loan quicker and achieve financial freedom sooner. Make extra payments whenever you have extra funds making it flexible. Significantly cut down on interest payments.

Things to check

Some lenders charge fees for early payments, so check for any penalties. Ensure that making extra payments won’t affect your financial stability. Keep an emergency fund to handle unexpected expenses.

Check with your lender for any fees or restrictions before making additional payments.

Go from fixed to floating interest rates

If you have a fixed-rate loan, it’s worth reviewing the current floating rate trends. Over time, floating rates usually end up being lower. Consulting with a financial advisor can help you assess the potential benefits of switching to a floating rate, especially in today’s high-interest environment. Fixed-rate loans often come with higher interest rates, typically 1-2% more than floating rates. If you stick with a fixed rate, you might pay more in interest over the life of your loan. Exploring a switch could save you money, but be sure to check for any exit fees before making a decision.

Opt for a shorter loan tenure

Opting for a shorter loan tenure can help you save a lot on interest, even though it might mean paying higher EMIs each month. With flexible tenure options available, you can choose a duration that fits your financial comfort. 

A shorter tenure means you’ll repay the loan faster, which reduces the total interest you pay over time. This approach not only leads to quicker home ownership but also gives you more financial freedom sooner.

However, it’s important to ensure that the higher monthly payments fit into your budget. Consider a shorter tenure if your income is stable, you want to reach financial goals faster, or if you expect interest rates to increase in the future.

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