Top 6 Ways To Reduce Interest Payment On Your Housing Loan

When you avail of a loan, you have to pay an interest every month, along with the principal. The net EMI depends on the loan amount, interest rate, and repayment tenure. When the interest rate and loan amount are high, you pay more, and vice versa.

Following the tips mentioned in this article can reduce your interest cost by a significant margin. Go ahead, and check the ultimate tips to save a few extra bucks every month.

The Top-6 Ways to Reduce Housing Loan Interest Rate

  1. Opt For a Shorter Repayment Term

The lender provides you with up to thirty (30) years for repayment when you avail of a housing loan. However, since the loan becomes a long-term liability, they charge a higher interest rate to minimise the risk. That being said, if you want to reduce the housing loan interest rate, you may consider reducing the loan term. Use a housing loan calculator to evaluate the costs before choosing the lender or loan.

  1. Prepay Frequently

Lenders generally impose a prepayment penalty on fixed-rate loans. However, they do not charge anything extra for housing loans with a floating rate of interest. Hence, if your loan has a floating rate of interest, you can prepay a part of the principal during the initial years of loan repayment. As you prepay a part of the principal, it reduces the effective interest rate.

  1. Check Your Credit Score

Whether you are repaying a housing loan or plan to avail one, you must check your credit score to get a clearer picture of your financial profile. When your credit score is high, i.e. above 800, lenders do not mind offering you extra privileges, such as a low interest rate. Hence, if you discover that your credit score is high, you will have a higher negotiating power and better chances to get a discounted interest rate.

  1. Transfer the Principal to Another Lender

A balance transfer is another legitimate way to reduce the housing loan interest rate. However, this facility only applies to existing borrowers with a minimum of one year’s repayment history. In this process, you find a lender offering lower interest rates than your current lender and transfer the outstanding principal. Since the interest rate is lower, your EMI amount may drop.

  1. Make a Higher Down Payment

Lenders generally request you to pay 10% to 25% of the home loan amount as the down payment. However, if you want to reduce the interest rate, try to increase the down payment amount. Since a higher down payment lowers the principal, you can expect to get a housing loan with an attractive interest rate.

  1. Scan Special Deals

Some lenders offer special discounts during the festive season. The discounts include lower processing fee, discounted interest rate, instant loan approval, etc. Keep an eye on such special offers to reap the benefit of a lower housing loan interest rate.


A housing loan is a long-term financial liability. When you take appropriate steps to reduce the housing loan interest rate, it helps you save an immense amount over the loan term.

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