With the recent increase in home loan interest rates, customers are looking at alternative options to bring down their hefty Equated Monthly Installment (EMI) on the loan. The interest payable by old, as well as, new customers has a hike and it has increased the burden for the borrowers. The interest amount can be reduced through two ways; one way is through home loan prepayment and the other method is by availing of a home loan balance transfer. You need to understand both the options and consider the one, which is suitable for you.
Home Loan Prepayment
The prepayment of a home loan is feasible to only those people who have adequate money to cover the outstanding loan balance. It is an early payment of the outstanding loan amount in part or full. If you wish to make an advance payment, you will have to pay more than two months of EMI amount at a time. If the loan has a fixed interest rate, there might be a penalty for prepayment and this could be up to 5%. In case of a floating rate on the loan, there will be no penalty for prepayment. It helps to negotiate the terms of prepayment before you sign the loan agreement so that the penalty amount is minimum.
Home Loan Balance Transfer
This option is for those who can find a lender who offers a low-interest rate to them than the existing lender. A home loan balance transfer involves the transfer of your current loan to a new lender with low-interest rates. If you do not have adequate funds to prepay the loan, this is an ideal alternative for you. It is also beneficial if you have a fixed interest on the home loan and see a drop in the rates in the future. Hence, you can shift to a lender who offers a floating interest rate to save a substantial amount of money. However, it is advisable that you talk to your present lender before making the move. At times, the lenders do accommodate with you and make a change in the interest rate.
What Should You Choose?
If you are wondering about prepayment or home loan balance transfer, which one you should choose, the best is to compare the cost and benefits. Only make a decision if the benefits of an option outweigh the costs. It helps to make a decision in the early years of the loan because this is when you will be paying the maximum amount in the form of EMI and interest. Hence, you must compare home prepayment VS home loan balance transfer by analyzing if you have adequate funds to make a prepayment and then take a wise decision.
If you make a prepayment, ensure that you have sufficient emergency funds for the future. Do not make a hasty decision and compare the options available with you before you go ahead with any one alternative. Both are different ways of reducing your EMI burden but you should choose your option carefully.
If you are looking to prepay your home loan and lower your cost at the same time, then you are definitely at the right place. You can now easily avail a Bajaj Finserv Home Loan Balance Transfer facility on Finserv MARKETS and take advantage of a plethora of benefits like fast application processing, quick dispersal and many more! So why wait? Apply for a Home Loan Balance Transfer with us, today!
Also read what is a home loan only at Finserv MARKETS.
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