While a home loan is an easy way to acquire the funding needed to buy a home, it does come at a hefty cost. The interest payable on a 20- or 30-year housing loan can be quite a sum, and of course, you want to minimize this liability as far as possible. Thankfully, there are a few reliable tactics to reduce the home loan interest payable. For example, experts suggest negotiating with your lender for a lower home loan interest rate on the reset date. This is just one of the many options available. To know more about borrowing cost-effectively, take a look at these tips to reduce your home loan interest burden. 

Make partial prepayments every year

One of the best ways to reduce your home loan interest payable is to make partial prepayments periodically. This is when you pay a set amount of the outstanding principal in advance over and above your EMIs, and such a payment works wonders in reducing your total outgo. Partial prepayments reduce your total principal amount, and the interest is adjusted based on the new value. Naturally, making such a payment even once can help you save on interest. 

Now, considering the benefit of one payment, it is only wise to devote any excess funds you have available to you towards such prepayments. Do note, some lenders have a cap on how many such payments you can make, so you should inquire about this before you do so. If there’s a limit for just 10 payments, try to make larger payments for maximum value. 

Negotiate with your lender for a reduced home loan interest rate

Every housing loan issued by banks after 2019 is linked to an external benchmark and this allows you to benefit from favourable rate changes, as they happen. If your home loan interest rate isn’t linked to one of these benchmarks, approach your lender to make the change, if they have the option of switching an existing loan to an external benchmark linked rate. The benefit of doing so is that you can negotiate with lenders for a lower home loan interest rate whenever there is a favourable financial reform. 

For instance, MCLR-linked loans are influenced by the repo rate. If the RBI cuts the rate, you can negotiate with your lender for new terms. However, this is only applicable if the new rate coincides with the reset period of your housing loan. In any case, a lower interest rate translates to lower interest outgo. Moreover, should you be able to secure a better rate, try to increase your EMIs for maximum value. 

However, one should also keep in mind that linking a rate to an external benchmark can have a reverse impact in an increasing interest rate scenario, wherein the transmission of the rates will be much faster in an external benchmark rate linked scenario in comparison to a loan linked to a MCLR or Prime Lending Rate (PLR) of the lending institution. Hence, one must be prudent while planning to switch benchmark for their existing loan.

Increase your EMIs as your income increases

Larger EMIs translate to lower interest outgo, which is something you can take advantage of. As you progress through your career or advance your business and your income grows, approach your lender to increase your EMIs as well. By paying higher EMIs, you service the loan for a shorter period, which reduces your total home loan interest outgo. However, do plan this increase wisely so that you don’t risk defaulting in cases of emergency. 

Transfer the loan to a new lender with the balance transfer feature

Another effective way to reduce your home loan interest outgo is to switch lenders. By opting for the home loan balance transfer feature, you can transfer your existing housing loan to a new lender and avail better terms. This approach is particularly helpful in the early stages of the tenor as the interest component of your EMIs is much higher than the principal. 

All of these tips are applicable only once the loan has been sanctioned and you’re repaying your debt. However, you can also work toward cost-effective repayment before you avail of the loan  by improving your home loan eligibility. Effective measures, including applying with a CIBIL score of 750 and higher, paying off existing debt, and applying for a joint home loan can improve your eligibility and help you secure a reduced home loan interest rate. When the goal is to borrow affordably, the offering and lender you choose make a big difference; for instance, Bajaj Housing Finance Limited Home Loan is a reliable option in the market. 

The housing loan by Bajaj Housing Finance is loaded with special features and benefits to allow for a cost-effective and convenient borrowing experience. With this offering, you can get approved for a sizable sanction and at a competitive home loan interest rate. You also get access to a flexible tenor that ranges up to 30 years for maximum repayment comfort while maintaining optimal outgo. Besides this, availing of this housing loan is simple as you only have to meet the basic criteria and submit your documents to enjoy quick loan processing. To expedite the process and skip a physical visit to the branch, apply online for a hassle-free experience. 

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