There are several methods which can be availed by borrowers to lower down the interest rate on their housing loans. Additionally, they can also consider methods of reducing the total interest paid on their loan, even though this rate of interest does not change.
These methods are discussed in detail below –
Balance Transfer
This facility, offered by many financial institutions, allows a borrower to do loan balance transfer their account from one lender to another. This can be an effective method to avail lower interest rates on a housing loan. Before transferring their account, borrowers should compare different offers from various financial institutions and select the lowest home loan interest rate.
Shifting Interest Scheme
Shifting from MCLR to RLLR can be an effective method to reduce the home loan interest rate. While the former was introduced by RBI to effectively implement repo rate cuts, a lack of fast implementation led to them introducing repo rate based interest rates. In this new system implemented by RBI, financial institutions are obliged to implement home loan interest rate cuts promptly.
Prepayment
This method does not reduce the interest rate on a housing loan but effectively decreases the total amount of money spent on interest payment. Borrowers can pay a lump sum amount to clear a portion of their loan principal, thereby reducing the tenor. With a reduction in the number of EMIs, interest paid on the loan is also lowered.
Borrowers should consider all the above methods to avail the lowest home loan interest rate or at least reduce the payment since it can save significantly in the long run.
