Switching the loan to a lender offering a lower interest rate helps the borrower in the long run. Home loans are usually long-term loans, whose tenures generally range from 15 to 30 years.
Hence, switching the loan to a lender offering a lower interest rate helps the borrower in the long run. However, note that changing the loan will not be possible in case of irregular repayments made by the borrower to the current bank.
There are several strategies that you can adopt to reduce your home loan EMI. You will have calculated the monthly repayment amount in advance with a home loan EMI calculator. You can try using a home loan EMI calculator to know the EMI if you can.
Here’s how you can reduce your home loan EMI:
Process of the Transfer: Firstly, as a borrower, you need to close the deal with your existing bank. For this, you need to submit a letter to your current lender requesting a loan transfer. The bank will give a consent letter or a no-objection certificate (NOC) based on your request, with the details of your outstanding loan amount.
The consent letter then needs to be given to the new lender who approves the outstanding loan amount on your behalf to the old lender. Once the transaction is completed, the new lender gets hold of your property documents.
Cost-Benefit: You can choose a longer home loan tenure to lower the EMI. The monthly payment will be lower, although you will end up paying more interest on the loan for a longer tenor.
Home loan Prepayments: Prepayments are good ways to lower your EMI for a large part of your home loan tenure. Early prepayments for a chunk of the loan in the early stages will help you reduce the principal amount and save money on future interest costs.
Home Loan Balance Transfer: In case another lender offers a lower rate of interest and improved terms and conditions, you can transfer your home loans accordingly.
However, work out the costs of repayment of the loan with the current lender and make sure that these are not higher than your projected savings due to the new lender’s lower interest rate. The lower interest rate will automatically equate to a lower EMI.
Down Payment: Make a higher down payment to lower the principal amount, and hence your EMI amount will be reduced since as you lower the principal amount, the lower will be the interest that you have to pay. It will help you save more money in the long run.
There are few non-banking financial companies such as Bajaj Finserv, Shubham Housing Development Finance Company, Aadhar Housing, etc. that provide EMI at a lower interest rate. If you have any queries, kindly let us know in the comment section below.
