RBI hiked repo rates by 40 basis points in May, 50 basis points in June and again by 50 basis points in September, effectively pushing it to 5.9%. With this, the times the historic low-interest rates for loans have finally ended. These rising rates affect the borrowers taking secured and unsecured loans the most. While borrowers do not have control over the rising interest rates, there are a few ways in which they can manage their loans, some of which are mentioned below:
5 Ways to manage rising mortgage loan interest rates
Here are a few ways by which borrowers can manage the increasing LAP interest rates:
Checking if other lenders are offering lower interest rates
Borrowers need to check the interest rate that is being charged on their loan against property and compare it with other lenders. If one has taken the from a competitive lender and it continues to be the lowest rate even after the rate hike, then there is no need to shift to a new lender. However, if the interest rate is still much higher than other lenders after the rate hike, then it will make sense for borrowers to switch to a new lender.
Bargaining for a lower rate by improving credit score
Borrowers who have maintained regularity with repayments have the opportunity of getting a reward for the same. In addition, improving credit score would mean the lender would find borrowers more trustworthy, and thus offer lower interest rates.
Opting for a tenor extension with the same lender
If borrowers are paying the lowest interest rate even after a hike and yet finding it difficult to pay the increased monthly EMI, they might consider asking their lender to increase the tenor of their loans. The repayment tenor that most lenders allow is up to a borrower’s retirement age. So, while the individual is young, they can ask to increase their loan repayment tenors to a certain extent.
Opting for a hybrid interest rate
New borrowers can opt for a hybrid loan where the lender will offer fixed interest rates for the initial few years, and after that, it will gradually shift to a floating interest rate.
Now that loan applicants know a few ways to manage the increasing loan against property interest rates, they can also take a few steps before applying for the loan.
One of the ways is calculating the EMIs beforehand with the use of freely available tools such as online loan against property EMI calculators. Though the hike rates are not in control of the borrower, getting an idea of how much the EMIs can be will help them with better financial management.
Try part prepayment if the tenor extension does not work
Suppose the lender does not allow tenor extension because the borrower already has the repayment tenor extended till retirement age. In that case, they might consider part prepayment of their . However, before doing that, they should consult with the lender if any part prepayment charges are included or not.
Tips to negotiate for lower interest rates
Apart from these factors, here are some tips which borrowers can follow to negotiate for lower interest rates.
- Keeping a good relationship and understanding with the lender, so that they consider the applicant trustworthy.
- Opting for a feasible loan amount
- Maintaining a stable and high level of income to improve creditworthiness
- Getting a loan at a younger age to extend the repayment tenor and thus, reduce the monthly EMI amounts
Various lenders provide pre-approved loan offers to simplify and accelerate the loan process. These are available on various lending products, including home loans and loans against property. To get more discounts and advantages on their loans, borrowers can check their pre-approved offers by entering a few basic details like name and phone number.
To conclude, these are a few ways borrowers can manage their mortgage loan rate of interest. They should monitor the RBI’s monetary policies and check when the interest rates are the lowest. A loan against property is a long-term financial commitment; thus, borrowers should be very careful while taking each step in their loan process.
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