Here is How to Reduce EMIs Even if the Interest Rates High

While the real estate sector continues to contribute substantially to India’s GDP, it is predicted to witness a further boost in its size to US$ 1 trillion by 2030. While its growth has a positive impact on India’s economic progress, escalated prices in this industry pose a challenge for potential homeowners. In an attempt to bridge this financial gap, multiple housing programs are launched to increase the affordability and accessibility of the properties. Such endeavors are backed by the easy availability of housing finances from reputed financial institutions.

The Pradhan Mantri Awas Yojana (PMAY) has further increased the provision of home loan. This scheme provides subsidies on home loan rates in India under its Credit Linked Subsidy Scheme (CLSS).

Thus, with lower home loan interest, the monthly installments get reduced. However, in case borrowers have an existing loan amount with a lender that is charging them a higher rate of interest, here are a few pointers on how to lower the EMIs and hence, reduce the impending financial burden –

• Opt for extended repayment tenors

Considering that lenders are reluctant to compromise on the interest rate, you can always opt for an extended tenor of 18 or 20 years. It reduces the EMI and helps you repay the credit availed as per your convenience.

You can use an EMI calculator to calculate your monthly installments and choose the right tenor.

Additionally, in case you approach lenders and avail their Home Loan, you can enjoy the benefit of their customized Flexi Loan facility. Under this facility, borrowers pay interest on the withdrawn/used loan amount only and have the option to go for interest-only EMIs at a time convenient to them. Availing such feature-loaded advances ensure your convenient repayment option and hence prevents any additional stress on the budget.

Individuals can avail such loans against minimum eligibility criteria and documentation across a hassle-free application process.

• Approach the lender after securing a higher CIBIL score

Considering that lenders have the reassurance of repayment via the mortgaged property, they are often less stringent about the required credit rate of prospective borrowers. Although this eases the availability of housing loan, having a healthy credit score can determine your home loan EMI and ensure that you get the best terms and conditions on your financial agreements. Thus, this helps you bargain upon the offered rate of interest on your advances. It leads to a reduced cost of the loan and hence increases the affordability of properties.

• Look out for balance transfer options

Often referred to as the last resort, existing home loan borrowers can always look out for balance transfer facilities to shift their current loan account to a lender who offers a competitive rate of interest.

However, considering that this is a crucial financial decision, borrowers must strategically plan it out and ensure that their preferred lenders offer the following –

• PMAY compliance
• Reduced rate of interest
• Negligible charges on balance transfer
• Complete transparency about the home loan fees and charges

Also, ensure to avail home loan interest tax benefit under Income Tax Act Section 24 (b) and also under Section 80EE (in case of first-time homeowners)

• Avail an appropriate type of interest rate

Availing an advance includes choosing a type of interest rate that best caters to their financial requirements. Lenders take MCLR as the benchmark rate and add on their spread to offer home loan rates in India. This benchmark rate of interest is subjected to alterations following market norms. Following this, borrowers can go for –

• Floating rate of interest – In case he/she avails an advance when the MCLR is at an all-time low. Considering that the floating interest rate varies as per the MCLR, they will have fair chances at gaining benefits from the reduced interest rate.
• Fixed interest rate – In case the individual avails a loan when the MCLR is at an all-time high. Considering that a fixed rate of interest is not subjected to alterations, they can enjoy lowered EMIs across their entire loan tenor.

Following the above-mentioned pointers helps borrowers avail a reduced EMI structure that ensures a lower cost of the loan and hence eases the repayment process. Having a sound credit history can also enable them to avail lower home loan rates in India.