It’s no secret that a home loan interest rate is a significant aspect that determines the total loan cost. The lender takes into consideration various factors such as your credit score, monthly income, employment history, debt obligation, etc. to decide the interest rate charged on your housing loan. Moreover, there are certain measures that you can take from your end to avail the loan at an attractive rate.
Some of these are mentioned below:
- Make a large down payment
The down payment refers to the amount that you pay from your own pocket to finance the property purchase. By making a higher down payment and availing a low home loan, you can increase your chances of getting an attractive interest rate. This is because the lender may have to bear a comparatively lower risk by sanctioning a low home loan amount.
- Improve your credit score
Almost all lenders will evaluate your credit score before approving your home loan application. If you have a high credit score of 750 or above, the lenders may consider you to be a financially disciplined borrower. Moreover, a decent credit score will reflect your good repayment capacity. All of this may help you avail the best interest rate. You can boost your credit score by minimizing your credit utilization ratio and clearing the outstanding dues.
- Opt for a short-term home loan
The shorter your loan tenure, the lesser will be your total interest outgo. Thus, if your repayment capacity permits, you must opt for a short-term loan by increasing your loan EMI. You can make use of a home loan interest calculator to get an estimate of your monthly instalments and total interest payable over the loan tenure.
- Home loan balance transfer
The home loan balance transfer facility allows you to transfer your outstanding loan amount from your existing lender to a new one. If your credit score has improved and your monthly income has increased since the time you availed a housing loan, you may be eligible for better interest rates. Thus, if you find a lender that offers a lower interest rate than your existing one, you must consider transferring the outstanding amount. This can help you save a large amount of money in the long run.
- Make loan prepayment
Home loan prepayment is yet another way of saving on the interest pay-out. You can utilize your surplus funds to foreclose your loan. This will not only make you debt-free sooner but also bring down the total loan cost. Do not forget to make a note of the prepayment charges before foreclosing your loan.
The above-mentioned tips can help you avail a home loan at a competitive rate as well as save on the interest pay-out. Besides looking for the best interest rate, you must also ensure that your loan doesn’t consist of any hidden charges.