Smart ways to reduce your Home Loan EMI

If you already have a Home Loan, you must be aware that your Home Loan EMIs take up a major chunk of your monthly income. It is one of the key components of your monthly expenses, which can easily shake your savings and exhaust your income sooner than planned.

Hence, it is imperative to opt for Home Loan EMIs after assessing your financial conditions.

Typically, you allot a certain amount of your income as Home Loan EMI, and you would want to learn about smart ways to reduce the EMI burden.

The below article lists some smart ways to reduce your Home Loan EMI.

Tips to lower your Home Loan EMIs

Experience smoother and cost-effective homeownership with these tips below:

1. Opt for a higher down payment

The loan amount is one of the most important aspects of Home Loan EMI. So, if your borrowing amount is less, your EMIs will also be lower.

The amount you pay in advance to purchase a home is called a 'down payment'. You typically take a loan on the rest of the amount.

Hence, if you opt for a higher down payment, you might have to consider taking a lower loan, which can save you from high EMIs.

2. Choose the right tenure

Longer tenure loans are a good option for individuals who are unable to afford high EMIs. The extended loan tenure can have a significant impact on your monthly EMIs.

Consider the below example.

Longer tenure loans can increase your overall interest cost. Hence, it is important to consider your financial obligations and current standing and choose an ideal repayment tenure.

Also Read: Ways to choose the right Home Loan for your needs

3. Improve your credit score

Home Loan lenders like banks and NBFCs assess your creditworthiness before granting a loan. This creditworthiness is checked through your credit score.

The better your credit score, the more your chances of getting the loan, the greater the loan amount getting approved and the better interest rates.

The Home Loan interest rates impact your EMIs, and when you get competitive interest rates, your EMIs are lower. By improving your credit score, you can get a lower interest rate.

4. Make partial prepayments

Your Home Loan EMI comprises two parts: the principal borrowed amount and the interest. The initial years of your loan mainly consist of payment of the interest amount, whereas the principal makes up for a minor portion of your EMI.

Hence, whenever you have surplus funds, it is always a better idea to make partial prepayments to reduce your overall EMI burden.

5. Consider Home Loan balance transfer facility

Interest on Home Loans varies from one lender to another. If you have a good repayment history and credit score but still pay high-interest rates for your Home Loan, it's time to switch lenders.

Many Home Loan lenders offer Home Loan balance transfer facilities wherein you can switch your remaining Home Loan to them (lenders offering lower interest rates).

However, it is always important to consider the costs and procedures associated with it before taking the plunge.

Also Read: Navigating the Home Loan process: 6 key considerations

Wrapping Up

Apart from the tips mentioned above, one more crucial step before opting for a Home Loan is to compare the interest rates and loan features of various lenders. Researching well before making a decision can help you lower your EMI burden. The online tools on the lender's website are the easiest way to calculate and compare your expected Home Loan EMI liability.

At Axis Bank, we understand the challenges of managing a Home Loan, and we are here to help you every step of the way. Our Home Loans come with flexible EMI options, competitive interest rates, and a range of other features that can make your home buying experience hassle-free.

Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.