Top Tips for Choosing the Lowest Interest Rates on a Home Loan

These days, most homebuyers opt for a home loan in India to fund real estate purchase. Property prices have increased drastically over the last few years, making it difficult for homebuyers to pay the entire cost of a home in one go. Home loans allow borrowers to buy their home now and pay for them slowly and conveniently. Home loans are repaid in the form of EMIs, which constitute a principal component and an interest component. As time progresses, the principal component of the home loan increases and the interest component goes down. 

Borrowers planning to avail of a home loan must avail of the lowest home loan interest rate possible. A low interest rate not only makes it possible for borrowers to keep their EMIs within the affordable range, they also make it possible for home loan borrowers to reduce on the total interest outgo. Lenders decide whether to approve a loan or not as well as the interest rate to be offered to a borrower after looking at various factors, such as the borrower’s age, income, credit score. Let us look at some of the things that borrowers can do to help them avail of the lowest interest rate possible when they apply for a home loan in India. 

Top Tips for Choosing the Lowest Interest Rates on a Home Loan 

1. If you want to avail of the lowest interest rate on your home loan, the first thing you must do is talk to several different lenders and negotiate with each one of them. This will help you understand what are the home loan interest rates that different lenders are offering and which lender is offering the lowest interest rate.
2. The next thing you must do is meet the eligibility criteria set by your lender. If you meet all qualifying criteria concerning age, income, credit score, etc., you will be able to negotiate for better loan terms and conditions, including lower interest rates. 
3. If you want to keep home loan interest rates low, keep your loan tenor short. When borrowers opt for a long loan tenor, they increase the risk involved for the lender in lending money to the borrower. Therefore, lenders charge a higher rate of interest on long tenor home loans. On the other hand, when borrowers opt for a short tenor loan, the risk involved for the borrower goes down and therefore, lenders sanction short-tenor home loans on low interest rates. 
4. Make sure your credit score is at least 750. Lenders consider a CIBIL score of 750 or above a good CIBIL score and borrowers who have such a CIBIL score get offered low interest rates as well as higher loan sanctions. So, before applying for a home loan, make sure your CIBIL score is at least 750. 
5. You can also increase the down payment if you want to lower the interest rate. When a borrower increases the down payment, they lower the risk for the lender in lending money and therefore, a higher down payment helps borrowers avail of a lower interest rate. 
6. Lastly, if you are already paying off a home loan and are unhappy with the interest rate that your current lender is charging you, you can benefit from a home loan balance transfer, i.e. transferring your loan to another lender offering better loan terms and conditions. 

Final Words

Availing of a low interest rate is crucial. Following the above-mentioned tips will help you in this regard. So, keep them in mind.