Looking for the lowest home renovation loan interest rate? The interest is the price you pay for the loan as well as services from your lender. While everyone wants a loan with the lowest possible interest rate, finding the same requires a bit of effort.
If you wsihto be eligible for the lowest interest rate on loans, here are some tips.
Maintain a Credit Score of Over 750
The credit score not only impacts your chances of being elibigle for the loan, but also has an impact on the interest rate. When you wish to revamp your existing house, you can hope for a home renovation loan at an attractive interest rate only if you have a high credit score. In India, a credit score of 750+ is considered as good. For the best interest rates on loans, you need to have a credit score higher than 800. The higher the credit score, the better are your chances of getting the lowest interest rate.
Higher-Income Attracts Lower Interest Rates
Your income plays a huge role in determining the interest rate on loans. Suppose, you and your friendare looking for the best loan against property at a low interest rate. Your CTC is around Rs. 1 crore per annum, while your friend is drawing around Rs. 60 lakhs a year. When you both individually apply for the same loan, the lender could offer you a lower interest rate than that offered to your friend. This is because you’re chances of paying the EMIs on time are higher than your friend. The lender is, therefore, most keen on having you as a customer than your friend, and may offer you discounted interest rates.
Working with Top Employers
Lenders need to feel assured that the borrower will repay the loan. When an applicant works with a big company or the central or state government, the lenders feels more secure and is more compelled to offer loan against property at a low interest rate. This is because a person employed in a stable job or a big company is less likely to be impacted by economic downturns or loss of job.
Relationship with the Lender
If you have borrowed from the bankand repaid the EMIS on schedule, or have been an account holder for some time, you may get a lower home renovation loan interest rate, loan against property or any other loan.
Make More Down Payment
If you pay more as downpayment, the risk for the lender reduces. The total interest payable reduces with this, even with the same interest rates. Also, you can request a lower interest rate. However, this is only in the case of a home loan. For these, lenders ask for a 20%-30% downpayment.
How to Reduce the Total Interest Payable on a Loan?
You can reduce the total interest burden by:
- Choosing a shorter tenure for your loan. In this case, the EMIs will be higher but the amount of interest you pay is lower than if you opt for a loan with a longer tenure.
- Making a prepayment. If you’ve received a bonus from your employer or got a promotion, you may have enough funds to prepay a part of the loan. This will reduce the principal amount and bring down the interest component. However, you need to check whether the lender charges for prepayment.
- Compare the terms offered by different lenders. However, going by interest rate alone is not a good idea.
- Opt for a balance transfer. If you find a lender whose interest rate is lower than what your current lender is charging, you can transfer the balance of your loan to the new lender.
- You can opt for higher EMIs to pay off the loan as soon as possible.
So, with a little planning, you can enjoy a home contrustion loan or loan against property at a lower interest rate.