How to Save Money on Home Loans?

Taking a Home Loan is one of the biggest financial decisions in life. It is often the first step towards building your own nest. It is very easy to get carried away and not take into consideration some of the important factors while taking a home loan. If you keep these things in mind then you can save money and also clear your home loan at the earliest possible.

Lets us understand how to pay off home loans faster:

• Re-examine your financial situation: Before taking any measures to pay off your home loan faster, first do a self check of all financial investments. Look at the short, long and medium term investments made and make sure that none of these are getting affected by the loan payment. The surplus amount of earnings left after meeting other financial goals should be directed towards payment of the home loan.

• Change EMI and save interest: Before choosing an Home Loan EMI option that is lower, think twice. Even if you increase your monthly EMIs by a slight amount, there is a chance that you will have to pay a lesser interest. This in the long run will put more liquid funds in the hand and will also help you pay the loan amount in a shorter span of time. You can choose Bankbazaar's Home Loan EMI Calculator to calculate Home Loan EMI for your loan amount.

• Consider partial payments: Whenever you have surplus funds in hands after receiving a bonus or increment, redirect those funds towards payment of the loan. Most banks and financial institutions allow this. This is one of the most convenient methods to clear loans in a speedy manner.

• Budget other expenses: When you have a loan in hand, make it the first priority to clear the debt. If not, the interest rate will keep on adding up and it will become a financial burden that leads to a lot of frustration and emotional stress. This will affect your other financial goals and also make it difficult for family members. So cut down on luxurious spending, expensive holidays and splurging for while and direct those funds towards the loan instead.

• Make a bigger down payment: It is always wiser to choose to make a huge downpayment to cut down on interest rates. The higher the down payment, the lesser the interest rate on the loan availed and vise versa.

• Take a loan for a short term: Though this may sound overwhelming in the beginning, it is always better to take a loan for a shorter duration. This will help  you pay off faster and also help save a considerable amount of money that will otherwise go out of the window as interest.

Apart from all these measures, it is also important to weigh all the pros and cons even before taking a plunge and going for a home loan. Compare all bank interest rates and choose one that is best in the market. Also, if you are a regular and long-term customer of a bank, make sure you negotiate and ask for a lower interest rate. Most banks will offer these kind of discounts to loyal customers.

Things to Consider Before Transferring Home Loan

If you are a home loan borrower, you must have seen other banks asking you to transfer your loan to them to gain benefits such as Longer Tenure, Lower Home Loan EMI, lower Home Loan Interest Rates etc. Transferring home loans means that the pending loan amount that you have with one bank will be transferred to another bank. In this case, you will be repaying the pending amount and continuing your loan with the new bank.

Transferring home loan from one bank to another is not a bad idea, but borrowers must be aware of all the pros and cons related to it. Home loan borrowers should take into consideration different factors before they decide to transfer their loan to another lender.

Things to Consider:

• Total Outflow – You should calculate the total loan amount that you have to pay back to the bank before you decide to transfer your home loan. Calculating the total outflow will help you compare the difference between the repayment amounts of your current and new banks. The new bank may reduce your EMI by increasing the tenure, but you must remember that in this case interest will keep adding on your outstanding amount. It is advisable to increase your EMI amount and clear off your loan sooner to save money on interest. If you are already paying a higher EMI to your current bank and are not struggling for cash, then you might not want to transfer your loan.

• Charges – If you take a home loan, you will have to pay various charges besides interest such as processing fee, legal charges, stamp duty, etc., to your lender. Before deciding to transfer your home loan to another lender, you must take into consideration all the charges (including interest) of the new lender and compare them with the charges of your current lender. Some banks charge a percentage of the loan amount as processing fee, some have a fixed amount while there are others whose processing fees is dependent on the occupation of the applicants. Also, if your current bank finds out that you are transferring your loan to another bank, it might increase the closure charges.

• Collateral Security – If you had provided a collateral security to your current bank while taking the home loan and have already repaid a huge part of your loan, then do not offer the complete collateral again to the new bank. It does not make sense to offer a collateral, the value of which is double your pending loan amount. You should offer a lower amount as collateral or ask the new bank to lower down the interest rate.

• Loan Terms and Conditions – Before you sign any loan agreement, you must read the terms and conditions of that particular loan. In case of loan transfer, you should read and compare the terms of both the banks to understand the pros and cons.

• Allied Account – Banks generally ask their borrowers to open a savings account with them when they apply for a loan. If the bank to which you wish to transfer your loan asks you to open a new account with it, then you should first find out the benefits and charges of that account. Also, if you use the current account of your current lender for all your banking needs, then you would be their premium customer. Premium customers enjoy extra benefits and services are provided to them quickly by banks. You should think carefully if you really want to lose this comfort and switch your loan to a new bank or stay with your current bank.

• Other Offers – Some banks try to attract customers by offering them extra benefits along with home loans such as credit card, insurance, etc. Before agreeing to transfer your Home Loan to another bank to avail such offers, you must consider if you even need them or not. Also, you must read the terms and conditions of such offers before accepting them.

These are some of the things that you must consider before transferring your home loan to another bank. Do not get attracted by offers such as low interest rate, free credit cards, insurance, etc., easily. Research well and choose wisely.

Top 5 reasons for drop in 2014 Home Loan EMI

Home Loan EMI

Home is the most precious and expensive asset that we make during our life. With the increasing range of homes in terms of cost, it is really very difficult for the people to get their dream home. And what else you get? A heavy and thrifty burden of EMI’s will make it even more expensive. But, one can manage the drop in Home loan EMI with the few reasons associated with the drop in Home loan EMI’s in 2014. Banks are now more customer centric and have given few options for customers to lower their EMI’s. Let’s discuss the top 5 reasons for drop in 2014 Home loan EMI.

Reasons for drop in 2014 Home loan EMI’s:

1.     Tenure Stretched to 30 years: Recently RBI has announced that there will be an increase in the tenure of Home loan for its repayment. Earlier the Loan repayment tenure was fixed at 20 years but now it has been stretched to 30 years. Because of this, the EMI will be distributed for 30 years and the Home loan EMI will get lower. So, the individuals who do not have much repayment capacity in their pockets can opt for 30 years loan tenure to reduce their burden of heavy EMI’s.

2.     Lowering of Interest rates: Recently many banks have reduced interest rates for their home loans like SBI has made it @10.15% for men and 10.10% for women. Lowering interest rates means that EMI will get reduced as most of your EMI in the initial years comprises of interest amount. Thus, due to lowering of interest rates, Home loan EMI gets reduced.

3.     Balance Transfer option available: Many banks has this option available with them. Balance transfer option means that if some other bank is offering comparatively lower interest rates on their home loan, the person can transfer his/her balance amount of loan to the other bank who is offering lower interest rate, in order to make his/her monthly EMI’s lesser. This can be done by using Home loan EMI calculator where you can calculate the difference or benefit you’ll get in your EMI’s, if you choose for balance transfer in other bank.

4.     Lump sum prepayment option available: Some banks have the option of Lump sum prepayment when you have good amount of cash in your hand. In this option you can prepay lump sum amount towards home loan and continue your home loan with the balance amount for the same tenure. This will reduce the balance amount left for payment and hence, will decrease your amount of monthly EMI’s.

5.     Floating Rate of Interest: This option is pretty much interesting. There are two types of interest rates that you can opt for. One is fixed interest rates which remains same throughout your loan tenure and the other one is floating interest rates which changes with change in the base rate announced by RBI from time to time. Going for a floating interest rate can give you a pleasure of less EMI, if the base rate is reduced by the RBI. Thus, you can get a chance of enjoying lower EMI’s.

Therefore, these are the top 5 reasons or options available with the customers in order to reduce the burden of heavy and high EMI’s. It is our pocket and no one else knows how deep or shallow it is. So, get your EMI’s adjusted at par with your repayment capacity every month. You can do so by using Home loan EMI calculator, which will give you a clear range of your EMI’s on the basis of the amount you are in need of, interest rate and loan tenure.

Get the full access to all the major providers of home loans, compare among them, calculate your EMI’s using Home loan EMI calculator and apply through your home loan on a single screen.