Opting for a home loan to purchase a property is a common and logical practice. However, considering its financial burden, it is not uncommon that borrowers often struggle to repay their dues on time, which furthers their financial distress.
This write-up will highlight tips for reducing home loan EMIs and freeing yourself from financial hardships. Continue reading to know more.
7 Tips to Reduce Home Loan Emi Burden
Here are the top 7 effective home loan EMI tips to reduce the monthly instalment burden:
- Opting for a Home Loan Balance Transfer
You can consider refinancing your ongoing home loan to a new lender if you get better deals, such as a lower home loan interest rate, longer repayment tenure, etc. This can help you save considerable money. However, before opting for this facility, compare the loan terms offered by different lenders and select the best deal. You should also consider the foreclosure and prepayment charges associated with the home loan balance transfer process.
- Opting for a Longer Repayment Tenure
Choosing a longer repayment tenure will decrease your monthly instalments and give you more time to repay your home loan. However, one crucial thing to remember is that opting for a longer tenure will increase your total interest outgo at the end of the term.
- Making a Higher Down Payment
If you have the funds to make a higher down payment, you will benefit from lower housing loan EMIs. This is because making a sizable down payment will lower your principal amount, and the financial institution may charge you lower EMIs against your home loan. However, you should only consider doing this if you have enough extra cash to make a down payment without facing any additional financial burden.
- Prepaying the Home Loan
The total interest you will pay on an ongoing home loan can be actively reduced via prepayments. Since you are repaying a part of the principal amount, the total outstanding will be lower, as will your EMIs.
Before starting a prepayment plan, speaking with the financial institution is imperative, as certain charges can be involved. You can save money over time and spend extra on other investments by making proactive prepayments.
- Choosing the Right Type of Home Loan Interest Rate
Another way of reducing the housing loan EMIs is to choose the right interest rate. Two types of interest rates are applicable on every loan: fixed and floating. So, you are servicing the loan at a fixed rate; the instalments will remain the same throughout the tenure.
However, if you are servicing the loan at the floating interest rate, then whenever the loan interest goes down, your EMIs will reduce as well, and vice versa.
You can always choose between these two methods, but remember the additional cost it brings.
- Negotiating With the Lender
If you have an excellent credit score, you can always negotiate with the lender to reduce the interest rates on a home loan. Proving your creditworthiness will reduce the risk factor, and the lender might agree to offer you the lowest home loan interest rate. This will consequently lower your EMIs and save you money in the long run.
- Asking for an Emi Holiday
If the tips mentioned above have not helped, and you are still struggling to manage the repayment, you can always ask for an EMI holiday. Under this facility, the financier will suspend your repayment for a few months and let you get your finances on track. After that, you can start the repayment and adjust the suspended instalment amount later.
With the tips to reduce the home loan EMIs out of the way, let’s also understand the implications of failing to pay the dues on time.
Implications of Not Paying the Housing Loan Emis on Time
Here is how non-repayment of EMIs can affect you –
Increases Your Financial Burden
Non-repayment of home loan EMIs can increase your total financial burden. Once you miss an EMI, you must pay it along with the next month’s due. Moreover, the financial institution will impose penalty charges, increasing your total debt.
Damages Your Credit Profile
Another notable implication of missing out on the EMIs is the damage to your credit profile. Besides lowering your credit score, it will also be recorded in your repayment record, which is not ideal. This will also tarnish your reputation as a borrower.
Getting a home loan can be a substantial financial burden, especially when interest rates are on the rise and real estate prices are increasing. If accurately calculated and effectively managed, the burden of home loan instalments can be manageable.
Managing a home loan requires dedication and financial discipline. You can actively reduce the interest burden on your home loan by implementing the tips mentioned above and managing the loan effortlessly.