Tips to Reduce Your Home Loan Interest Rate

Tips to Reduce Your Home Loan Interest Rate
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Buying a home is an amazing feat, something which every one aspires for. However, due to the steep cost, most people end up using a home loan to pay for a larger part of the price. Home loans come with an interest rate and you need to shop around for banks offering the lowest interest rates. This will influence the size of EMIs you get to pay out each month as well as the total interest paid out by the end of the loan tenure.

There are some ways that you can reduce the home loan interest rates and here are some tips to help you achieve this goal:

Down Payment

Make a larger down-payment as this will reduce the size of the loan taken. By borrowing less, you have to dole out less as interest paid out. Most banks pay 75-90% of the property price, but plan on taking lower loan amount.

Good CIBIL Score

Your credit score should ideally be above 750 points. Better CIBIL scores show the bank that you are a responsible borrower and have higher chances of negotiating a lower interest rate on your home loan.

Floating Interest Rates

It is more appealing to go floating interest rates as it rises and falls with other benchmarks and is usually 1-2% lower than fixed rates. Lower interest rates also mean more savings on your monthly EMIs.

Shorten Loan Tenure

While longer tenures mean smaller EMIs, you do end up paying more as interest. By opting for shorter tenures, though your EMIs may go up a little, the interest paid out will be reduced substantially.


Using salary hikes and bonuses received towards making periodic prepayments will actually result in bringing down your total interest paid out. Prepayments will not only bring down the tenure of the loan, but also the principal amount and the interest on it.

Default Payments

Don’t skip on EMIs as you stand the chance of losing your collateral if you haven’t cleared your dues three months in a row. Instead, you could ask for an EMI waiver from the loaner bank for 3-6 months, till your finances come back into order again.

Hope these tips turn out to be helpful!