The interest rates on your home loan are subjected to change when you have chosen floating interest rates.
In the past years, home loan rates have been increased by several basis points affecting the budget of thousands of borrowers.
So, you must be thinking about solutions to deal with this tricky situation.
What might help you is that although changing interest rates may negatively affect your financial plans, there are several ways that can help you to tackle such a situaion.
Here are the five ways that would help you to effectively manage the interest rates.
Pre-paying the Loan
This one of the most effective way to reduce the burden caused by the home loan.
You can do this by directing the money from your other investments to repay the housing loan.
If you have surplus funds available, you can always use them to prepay the home loan and finish it before time.
Prepaying the home loan will help you reduce the home loan interest rates as you will be repaying it before decided tenure.
Just one thing you need to pay attention at is that some lending institutions charge pre-payment penalties on this type of payments against the home loan.
These fees might be expensive, and you will end up paying more amount than required.
However, many banks do not charge pre-payment fees at all. So pre-paying loans becomes an excellent option to manage your home loan.
Renegotiate the Home Loan
The lending organisations offer different interest rates to their customers. Many factors like income, credit score, etc. affect the interest rates decided by the banks.
Therefore, they can be different for different individuals. For example, the interest rates might be lower for someone having good credit than someone with a bad credit score.
Moreover, sometimes banks offer lower rates to newer customers than their older ones.
In such cases, when you feel like your lender has given you higher interest rates, you can always renegotiate the terms in order to reduce them.
Transferring the Home Loan
When you get a home loan, you should always keep track of the market in order to manage your EMIs.
While researching, you may find out that the services provided by your lenders are not catering to your needs, or another lender is giving lower interest rates on the home loan.
In such cases, you can opt for a home loan balance transfer to another bank providing lower interest rates.
Increasing the Amount of EMIs
The experts consider this as one of the most feasible option to manage home loans. The higher the amount of EMI, the lesser will be total payable interest. So, choosing higher EMIs help you to effectively manage your home loan. Just make sure that the amount of home loan EMIs is not disturbing your monthly schedule.
Making Part Payments
This is another way to decrease the burden of interest on the home loan. You can pay off a part of the loan, which eventually reduces the total payable interest.
Home loan interest rates can be overwhelming especially when you are a family person with many other expenses to take care of.
That is why using any of the above ways can be financially beneficial for you.