There are simple ways to save yourself from the quagmire of expensive loan EMIs. Read on to know more.
Buying a house without a loan is a major challenge in the face of expensive realty today. Most buyers are fearful of the EMI cycle that comes with the loan – they are afraid that they will be unable to juggle their expenses while repaying the loan.
But there are ways to reduce the EMI burden – these are some measures you can try:
* Opt for a lower loan amount.
A home loan may pay for a maximum of 90% of the house’s value (for loans not exceeding Rs 25 lakh). The remainder must come from your own resources. If your income is quite high, you might have a higher loan eligibility – but do ask yourself if you should take a higher loan and a bigger house, or a smaller loan and a smaller house. You could reconsider the property you have selected – maybe a comparable, lower priced one will suffice? Or maybe the house’s owner/developer is open to negotiating the price?
* Choose a lower rate of interest.
The rate on interest on the housing loan is the primary determinant of how expensive or affordable the loan will be. The higher the rate of interest, the more expensive the loan becomes. Home loan companies today are offering interest rates ranging from 8.5% to 10%. Do some research into the loans being offered and the best choice in terms of home loan companies. You can use an EMI calculator for the home loan, to find out how much EMI is payable at a certain rate of interest.
* Have a repayment plan in place.
It is simple enough to take the housing loan, but the difficulty lies in repaying it quickly. Most people choose to pay the loan over its entire tenure of 15 or 20 years. However, the EMI comprises of interest and principal – so the longer you service the loan, the more interest you pay the home loan company. Instead, it is better to repay certain sums of money every month apart from the EMI being paid. Following a repayment plan every month will reduce the loan burden much quicker.
* Rejig the interest periodically.
There are times when home loan companies reduce the interest on home loans, if the RBI reduces the repo rate on lending. This is applicable to floating rate of interest. You can have the lending institution lower the interest rate so as to reduce the EMI and the overall repayment amount. If your lender is offering a lower rate of interest than the one you are paying, you can have the interest rate reduced on your loan after paying processing fees. Do use an EMI calculator for home loans to find out if there is an appreciable difference in the EMI amount. Even if there isn’t, it is better to get the interest rate reduced.