The EMI or Equated Monthly Instalment of the best housing loan in India consists of two elements – principal and interest. The interest rates might increase or decrease depending on your loan eligibility.
Interest occupies a prominent spot in loan EMIs. You can get the lowest housing loan interest rate and reduce your financial liability by following the tips mentioned in this article.
Read on to discover the top four tips to improve your home loan eligibility criteria and get the lowest interest rate.
4 Tips to Get the Lowest Home Loan Interest Rates in India
As mentioned, housing loan interest rates depend on the home loan eligibility criteria. So, if a borrower’s eligibility is high, they get the lowest rate and vice versa. Here are the four best tips to get the lowest housing loan interest rate in India:
Aim For an 800+ Credit Score
The first thing Indian lending institutions check after receiving the application is the borrower’s credit score because the score speaks volumes about the borrower’s credit history, credit profile, financial status, and loan mix.
If the borrowers have been paying EMIs and credit card bills, their credit scores will be high. While defaulting multiple times decreases, their credit score will go down.
A credit score is often referred to as a CIBIL score since TransUnion CIBIL is India’s most reputable credit rating bureau. Other credit rating bureaus are Equifax, CRIF Highmark, and Experian.
Reputable NBFCs, like PNB Housing, consider a CIBIL score of 800 or above as the best score.
So, if your CIBIL score is 800+, you are a salaried or self-employed professional, and your loan amount is within INR 35 lakh, you can expect the interest rate to start from 8.25%. However, if your credit score is less than 800, the interest rate may start from 8.3% and go up to 10.45%.
So, if you want to get the lowest rate, increasing your credit score is imperative.
Opt for a Floating-Rate Loan
In India, the best housing loan interest rates are generally of two types – floating and fixed. If you avail of a fixed-rate loan, your home loan interest rate will remain the same throughout the loan term.
However, since the Reserve Bank of India (RBI) frequently changes the benchmark rates, you won’t get any benefit if the RBI decides to reduce the rate.
On the other hand, the interest rate of floating-rate loans depends on the RBI-set MCLR or Marginal Cost of Lending Rate. So, if the RBI decides to reduce the MCLR, you can benefit, provided your lending institution decreases the rates.
Hence, floating-rate loans often provide more cost-efficiency than fixed-rate loans.
Increase Your Housing Loan Down Payment Amount
The down payment is a crucial part of any loan. Down payment is also mandatory for borrowers since it indicates their seriousness about loan repayments.
The minimum down payment amount is usually 10% of the housing loan amount. However, you may increase the amount depending on your financial capability.
Increasing the housing loan down payment amount is beneficial for two reasons.
First, it reduces your net loan liability and helps you meet the home loan eligibility criteria. Second, it prompts your lender to offer you a reduced interest rate.
So, try to increase the down payment amount when applying for the best housing loan in India since it might lower the interest rate.
Negotiate With the Lending Institution
It’s a no-brainer that this is the easiest of all tips. NBFCs usually perform many checks to ensure the loan does not become a non-performing asset.
However, if your home loan eligibility is high and all criteria are fulfilled, you can negotiate. Besides checking a borrower’s credit score, lending institutions also evaluate the monthly income, age, loan amount, and relationship with the lender.
To increase your chances of getting a low-interest loan, you may have to prove that your income is stable enough to make timely EMI payments.
Improving your credit score, choosing a floating-rate loan, increasing the tenure, and negotiating with the lender are four proven ways to increase your eligibility for the best housing loan in India.
However, the best lending institution can simplify these processes for you by providing you with a housing loan with the best terms.