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Ways to Reduce Housing Loan Interest Rate for Existing Borrowers

in Finance / Loans by Atish Nayar on 08/21/2017

With reducing home loan rates earlier this year, there was a wave of happiness among those who were delaying the decision of taking a home loan again and again. On the contrary, those who had already taken up the loan were regretting their decision.

If you are one of the existing home loan borrowers, you don‘t have to worry anymore. Here is how you can reduce your current Home Loan Interest Rate for your benefit. Have a read ahead.

1.Readapt to a lower rate:

If you have taken up a home loan from a non-banking financial company, you have the opportunity of resetting your rate of interest just by paying a conversion fee. Usually, NBFCs don‘t modify the BPLR (Benchmark Prime Lending Rate) rate or simply base rate. On the contrary, they change the spread, which leads to a reduction in your interest rate altogether. Unlike banks, here you have the chance to reset your interest rate anytime you want. Also, the fee for conversion varies from a company to company.  

2.Increasing Tenure:

Another way to reduce your interest rates is by increasing the tenure of your loan. If you have a long tenure, you can distribute the principal amount and interest across an extended number of months to reduce Housing Loan Interest Rate. However, you would have to increase the loan EMI as well or else you will end up paying more interest.

3.Refinancing the Loan:

Another way of reducing the interest rate is by refinancing or opting for the option of the balance transfer. In this option, you can shift your loan to some other NBFC which is providing a loan at the lower cost. But, before starting this process, you must know that it will take a long time. It is nothing less than waiting for a loan approval right from the beginning. Furthermore, this procedure can be quite expensive as well. You would have to pay various fees to get it done.

4.Premature Payment:

One of the best ways to prevent yourself from spending a huge amount of interest rates is by paying the loan amount before the tenure. If you have some savings and if you can afford to pay the loan amount earlier, it will save you from paying high rates. However, one thing that you must keep in mind is that you should not pay your emergency funds.

5.Analysing Cost-Benefit:

Before taking any decision, you must calculate the total cost that you would have to pay for reducing the rates and the amount that you can save through this process. Going for it won't be considered a wise decision if you are paying more than what you can save. Furthermore, if your tenure is left only for few years, then also you won‘t be benefitted from reducing the rate as you have already paid a lot.
So, these are some of the ways that you can adopt for reducing the interest rate if you are an existing borrower. However, do all the research and see what all the benefits you can gain from changing your interest rate before taking the plunge.

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