How to Reduce the Impact of Rising Home Loan Interest Rates?
Aug 27, 2018 10:02
Time is changing, and a significant aspect of life - building a home - is no longer restricted to people in their 40s or 50s. With a steady rise in income of young individuals, it doesn’t come as a surprise that a vast majority of loan takers in the present times are in their late 20s or 30s. That being said, it is imperative to understand that a Home Loan is a long-term financial commitment, which may prove to be little complicated to handle, especially considering the constant fluctuations in interest rates.
If you are someone who already has a Home Loan and have a feeling that you might struggle in the foreseeable future, then don’t worry. Instead, sit back and have a quick look at the below-mentioned tips. Not only will these tips help you deal more efficiently with your loan, but will also help ward off any unwanted debt burden.
•Review Your Outstanding Debts
More often than not, a Home Loan happens to be the largest debt in one’s portfolio. However, considering Home Loans are offered at comparatively low-interest rates, there may be other loans such as personal which may be attracting higher interest rates. Hence, it is highly recommended, that you make a list of all the outstanding debts in your portfolio, and compare the interest rates. Try to pay off the loans attracting extremely high-interest rates, such as Credit Card bills, or Personal Loans. Not only will this reduce your financial burden, but will enable you to concentrate better on the single largest loan of your life - your Home Loan!
•Review Your Investments and Savings
In case you see a hike in the interest rates in the coming future, it can prove to be of great help if you have sufficient savings to pay off your loan at the earliest. In order to increase the bulk of your savings, you may want to liquidate some of your assets, such as liquid mutual funds, fixed or recurring deposits.
If however, you don’t have any liquefiable assets, we recommend you to start building your savings, as soon as you opt for a Home Loan. It may seem to be added burden to begin with, but in the long run, your effort will pay off by helping you avert the repercussions of increased interest rate! To do so, you ought to take a close look at your living expenses and identify the aspects which you can cut down on. Once you do so, you will need to find an efficient way of investing this money. You can either use the conventional method of creating a recurring deposits account or can simply invest in short-term mutual funds. When you do so, make sure that these savings do not drastically bring down the quality of your life, else, it will become too taxing for your family, and in some cases, you may even need to take a debt to meet your existing financial obligations.
Hence, it is recommended that you strike a perfect balance between your expenses and savings.
•Handle Your Loan Efficiently
This is a tip that will largely differ depending on the stage of the Home Loan that you are at. In case you have just begun the repayment, and are 1 or 2 years into it, it will prove to be of great help if you can make a prepayment, as it will considerably bring down your interest outgo.
In case you feel that the marginal cost of funds based lending rate (MCLR) in the coming future will remain constant, it is ideal to ask your lender to offer you a fixed rate interest for the initial part of your loan. This will help you adjust better to the new financial commitment in your life, as you will be paying a similar EMI, every month for a few years, before it begins to fluctuate.
However, if you have paid off the better part of your EMIs, and your outstanding loan is expected to finish off in the coming 2-3 years, it is best that you do not take any actions regarding the loan, and keep paying your EMIs on time. This way, once your loan tenure is complete, you will be entitled to a significant tax deduction. The deduction you will enjoy will be even higher, if your tax bracket is high, say 30%.
•Go for Home Loan Balance Transfer
In case, none of the above steps work in your favour, and the rising interest rates seem unmanageable for you, you should Apply for Home Loan Balance Transfer (HLBT). It is essentially the process of transferring an existing Home Loan from one lender to another, for better services, and more importantly for a lower rate of interest. The astounding facility of HLBT will help you enjoy better interest rates, while also bringing down the amount per EMI significantly. This simple feature can help you save a substantial amount of money while offering you with the much-desired peace of mind, resulting in a perfect win-win situation! We recommend that you opt for this facility in the early years of your Home Loan, as this is the time when the more significant part of your EMIs goes towards the interest.
When you opt for one or more of the above-mentioned tips, always remember, that eventually they should help in reducing your loan burden. Hence, try not to make any hasty decisions, and always keep the well-being of your family as your top-most priority.
Now that you are aware of some of the most efficient ways of handling the impact of rising Home Loan interest, it is high time you start looking for the best Home Loans in India, and pick the one that best suits your needs!
To apply online for Credit Cards, Secured Loans and Unsecured Loans, visit www.mymoneymantra.com, the leading online lending marketplace that offers financial products from 70+ Banks and NBFCs. We have served 2 million+ happy customers since 1989.
Talk to our Loan Specialists toll-free at 1800 103 4004 to know more about our products and offers.
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