Housing loan interest rates can rise due to several reasons; it is imperative for borrowers to deal with this rise since it effectively amounts to an increase in the total cost of the loan.
The different methods of tackling any rise in home loan interest rate are listed below –
- Part-prepayment
This method of tackling a rise in the housing loan interest rate can be through part-prepayment. In this method, a borrower can pay a major portion of their outstanding loan amount in a lump sum. This reduces the total interest paid by the borrower on the line of credit.
- Balance transfer
Borrowers can transfer their existing loan account to a different financial institution to avail better rates of interest on their home loans. It is imperative that borrowers use an online calculator to check the amount they can save by transferring the existing loan. They should consider the additional charges which are levied while transferring a home loan.
Changing the type of interest rate
Borrowers can consider changing their home loans from MCLR based system of interest calculation to RLLR based system. In this latter system introduced by RBI, faster rate cuts are mandatorily implemented by financial institutions. Borrowers must also note that shifting to this system can also lead to a faster rise in the rates, depending on the market fluctuations.
Borrowers can use any of the methods mentioned above to tackle a rise in home loan interest rates. They should check all related details before proceeding with any of them.
