According to credit bureau CRIF High Mark’s report, the third quarter of 2023 (Q3) has witnessed a fall in the value and volume of home loans by 2 to 6%. The decline is because of a surge in interest rates.
However, with Diwali approaching, banks and other financial institutions are offering attractive home loan festival offers. This can turn out to be a good opportunity for all prospective homeowners who have been planning to purchase the home of their dreams for a long time and have been saving money for the same.
How to save money on home loan during festive season?
With the festive season comes the opportunity to buy a new home. Banks and other financial institutions come up with a number of offers to attract more people to become their customers. Here are some tips as to how applicants can save money and manage expenses to avail the benefits of home loan festival season 2023:
- Plan all expenses before any celebration
To begin with, the general rule is to plan all the expenses before any major festival to ensure that one does not cross the budget. This does not mean one should not enjoy the festivities. However, people need to plan their finances according to their financial commitments.
If a person plans on purchasing a home, it must be only if they have the capacity to bear the EMI repayments after fulfilling all the other regular expenses. This will help in spending the money systematically without breaking the bank.
- Do all the research in advance
Before opting for a home loan, it is extremely important to do an ample amount of research so as to save a lot of money. There might be a situation when two financial organisations offer the same interest rate; however, the application fee and other charges vary.
Nowadays, all the information is available online; therefore, applicants can compare the offers provided by different lenders and use an online home loan calculator to find out their eligibility for the same. Only after this should they choose the one that suits them the most.
- Ask for a lower interest rate
Avail a home loan from a lender if the interest rate applicable is within the budget. Applicants need to negotiate with the financial institution if possible. If the applicant is a loyal customer of the financial institution, the institution might consider this and charge a lower interest rate.
- Prepay the loan amount
Borrowers should consider prepaying their loan in part or in full whenever there is extra cash in hand. This will help in saving a lot of money on interest rates. However, one must only prepay the loan when there is no prepayment penalty applicable.
This can end up making the loan more expensive than saving money. Making repayments on time leads to a healthy credit score. On the other hand, delayed payments lead to additional burdens like penal interest and late fees that might increase financial burdens.
- Home loan balance transfer
If the current home loan interest rate that a borrower has to bear is becoming too much. It is best to opt for a home loan balance transfer. Many financial institutions offer much lower rates than what the present lender is asking for. It is best in this situation to transfer the balance amount to any financial institution offering a lower interest rate and repay it at a rate one can afford.
- Make a larger down payment
If a borrower makes a large down payment, then the loan amount will be reduced considerably. This will also help in managing a lower interest rate. Therefore, paying a large down payment offers the dual benefits of availing a lower loan amount and paying less interest.
- Maintain a high credit score
This is a significant factor associated with home loan applications, especially during the festive season. Many lenders offer great home loan deals with low interest rates, provided a person’s credit score is 750 or more.
A good credit score is a way to determine one’s risk profile and the capability to repay a loan in time. One way to improve credit score is by avoiding any delays in repaying previous loans and credit card debts.
If it is not possible to maintain a good credit score. An applicant can include a co-applicant to get better offers. The co-applicant can be a close relative but does not need to co-own the property.
- Flexible repayment option
It is important to look for a home loan festive offer that comes with a flexible repayment policy. This can help in reducing the home loan EMI burden. Prospective homeowners need to choose the one that suits them the most. A flexible repayment option is a great way to make repayments easier.
Many financial institutions offer customisable repayment options that give their customers. The freedom to pay only a part of the EMI to begin with so that they can get used to the repayment process at later stages.
- Other offers
Apart from offering lower interest rates, many financial institutions come up with other facilities as well. Some of these include discounts on processing fees and pre-approved loans.
Many banks and other financial institutions offer pre-approved loans to their long-standing customers. By opting for these loans, borrowers can get a whole lot of advantages, like faster loan approval. Prospective homeowners can check the official website of their preferred lender to see whether they are eligible for any such offer.