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Is your Cash Flow Comfortable? Decrease your Housing Loan Tenor Now

After countering an economic slowdown in 2020, India is gradually coming out of recession. The GDP grew 1.6% in the fourth quarter of 2020-2021. The Gross Value Added (GVA) also registered a growth of 3.7% in Q4 of the same period.

As a ripple effect, the income of salaried individuals is also likely to increase almost by 6.4% on an average in 2021, says a Wills Towers Watson survey. With sufficient disposable income, individuals can now avail a home loan against a reduced tenor with ease.

Existing borrowers can also reduce their home loan interest burden by cutting the loan tenor short. Following is a look at how to reduce the tenor and maximise savings effectively.

Ways to decrease home loan tenor and maximise savings

Typically, a home loan accompanies a tenor of up to 20 years. While it allows individuals to service affordable EMIs, the interest outgo might increase significantly. Nonetheless, if a borrower has sufficient cash flow, he/she will be able to repay the loan faster with increased EMIs.

Following are some of the most effective ways to reduce home loan tenor and save on interest.

  1. Apply to increase EMI payable

Individuals with a spotless credit history are eligible to negotiate loan terms with their existing lender. However, before approving the same, lenders assess several factors, including the FOIR of the applicant. If the FOIR is less than 40%, a lender is likely to approve the application.

There are two possible ways to reduce FOIR – increase income or reduce fixed obligations. In case you are servicing a home loan, and any of these instances improve your repayment capacity, you can apply to increase the EMI payable.

With increased EMIs, you can repay the loan faster within a shorter tenor. However, you can always opt for the assistance of a home loan EMI calculator to estimate monthly instalments and interest payable.

  1. Opt for part-prepayment

Another way you can trim your home loan tenor is by opting for part-prepayment. It allows you to repay a lump sum amount when you have surplus funds. You can utilise income from incentives, bonuses, earnings from investments, and other sources to make the prepayment.

It helps in reducing the tenor and also the interest payable. For instance, an individual opted for a home loan of Rs.50 lakh for 10 years with an interest rate of 7.5%. Now he/she earns Rs.20 lakh from prior investments and decides to pay the amount towards loan settlement. In that case, the new EMI would come down to Rs.35,611 from Rs.59,351, or the tenor would reduce to 61 months or 5 years and one month.

Hence, part-prepayment is one of the best ways to reduce home loan tenor. It is also an effective way to decrease your home loan interest. Selected financial institutions also allow individuals to make part-prepayment without any additional fees.

  1. Consider home loan refinancing

Generally, individuals opt for the balance transfer facility to get a reasonable home loan interest rate. However, it also allows them to shorten the loan tenor. Existing borrowers can transfer the outstanding loan balance to a new lender, and they can choose a short tenor to repay the due amount. Since the interest rate is lower with a new lender, the EMI would not increase that much compared to EMIs with the previous interest rates.

To leverage more benefits, it is important to know when should you do a home loan balance transfer. Note that existing borrowers can opt for home loan refinancing only after a certain period has passed from availing the loan.

Existing borrowers can also avail pre-approved offers that make loan processing quick and straightforward. Besides home loans, such offers are also available on various credit products like loans against property. Enter your name and mobile number to check your pre-approved offer.

Besides reducing the tenor of a home loan in India, new borrowers can also reduce interest burden by following some simple tips –

  • Meet lender-specific eligibility criteria to avail competitive interest rates and reduce borrowing cost.
  • Opt for a higher down payment and reduce the loan amount applied for.
  • Compare different lenders before applying with one.
  • Choose a shorter tenor.
  • Select the right interest type.

However, besides interest, both new and existing borrowers can save further on income tax payable when they service a home loan. It allows them to save up to Rs.1.5 lakh on principal payment under Section 80C of the ITA. Moreover, they can also avail tax benefits of up to Rs.2 lakh on interest payment.

It is always advisable to shorten the home loan tenor if you maintain an adequate cash flow. It results in a lower borrowing cost and improves credit score due to faster repayment without fail.

Top Reasons To Get An Online Home Improvement Loan

Home Improvement Loan

Depending on one’s requirements and preferences, home renovation can involve significant expenses. While individuals often employ their savings for house remodeling or renovation, eroding the savings may not be a good option from the perspective of financial security.

Instead, raising funds via a home improvement loan can be a smart financial decision for homeowners. As these loans come with unrestricted end-use, the availed amount can be used for all renovation purposes.

From the elaboration given below, individuals can understand the primary reasons to obtain an online home reconstruction loan.

Home renovation loan – Meaning and reasons to avail

Typically, a home improvement loan is a customized personal loan that allows individuals to borrow an eligible amount, which can be repaid within a stipulated tenure. It is an unsecured loan as borrowers need not mortgage their property to obtain the credit.

Moreover, when applying for a home renovation loan, applicants must be careful about their eligibility. Usually, these eligibility measures can include age bracket, minimum monthly earning requirement, and excellent credit rating of not less than 750.

Further, once the eligibility requirements are fulfilled, a borrower can avail of the loan amount to fulfil the following home improvement needs –

  • Maintenance of the house
  • Repair to the interiors
  • Remodelling of a room, kitchen, bathroom or the entire house, as required
  • Painting of the house
  • Woodwork and flooring
  • Extended construction like patio

While these were the home renovation requirements that can be fulfilled with such a loan, these online advances also come with attractive features that make them a suitable funding option. Take a look.

Reasons to fund home improvement with a personal loan

  • Instant funding

Because of its collateral-free feature, individuals can save a lot of time when availing the advance, especially when applying online. Once you fulfil all eligibility requirements and apply online, lenders can disburse the loan amount within a short time.

Also, based on the lender and their eligibility, individuals can acquire a home improvement loan amounting up to Rs.25 lakh.

  • Flexible repayment tenure

Moreover, this financing facility enables individuals to repay the borrowed amount within a flexible tenure through EMIs. They can choose a repayment period of up to 60 months as per their affordability.

However, while choosing a tenure, borrowers need to be cautious about the instalment amount and avoid mistakes when they start a home renovation project. For convenience, individuals can use a loan EMI calculator that helps to decide the right principal amount and tenure that keep the instalments within their repayment capacity.

  • Competitive interest rates

Applicants can find various home improvement loan interest rates from different lenders. Thus, thorough research and extensive comparison are required to find the most affordable rate available.

Notably, customers with a strong credit profile can obtain competitive interest rates. For example, if a borrower possesses a credit rating of more than 750, he/she might be able to negotiate for an interest rate lower than what the lender usually provides.

  • Tax benefits

Typically, personal loans do not come with any tax deduction benefits. However, when this credit is availed for home renovation, borrowers can opt for a tax rebate of up to Rs.1.5 lakh under section 80C of the I-T Act 1961, within one financial year. Such tax benefits can cut down the overall cost for home improvement.

  • Simplified documentation

Another reason to avail of a home improvement loan online is its easy and simple documentation process. Borrowers are required to submit these following documents for loan application approval in no time.

  • KYC documents that can be Aadhaar, passport, voter ID, driving license, PAN, etc.
  • Employment ID.
  • Salary account statement.
  • Salary slips.

Nonetheless, on the basis of the lender selected, individuals can be asked to produce other documents as well.

Further, one can opt for lenders such as Bajaj Finserv that bring pre-approved offers. These offers can significantly reduce all the hassles of a loan application and approval with zero documentation for existing customers. Applicants can find these offers on several financial products like business loans and personal loans. You can look at your pre-approved offer only with your essential contact details.

As for these personal loans, it is vital to know about home improvement loan and its terms of lending before applying for the advance. After checking the personal loan fees and charges for home renovation, one can apply for the advance online and expect fast loan processing.