NEW DELHI:At present, customers have a plethora of options available from banks and financial institutions with regards to home loans and their interest rates. Today, banks and financial institutions also offer flexible interest rates for different income categories. Here’s a few tips to negotiate your interest rates on home loans:
The first and the most important strategy to negotiate your interest rate on home loans is to constantly update yourself with what different lenders are offering. One should check both the fixed and variable home loan rate and then compare the two against each other. Figuring out the loan eligibility on the basis of information collected from agents is another crucial pre-requisite before deciding to opt for a home loan. Such discussions also help consumers in deciding relevant issues such as type of interest rate tenure, other charges etc. Exercises like this will also protect the borrower from getting misled by lenders who often use various jargons to lure customers.
Having all the information you require can also be useful for someone who has already availed a home loan. It will help him/her learn if they are paying an extra amount and also if another bank or financial institution could provide a better rate. The facts on the rates offered by different banks and financial institutions will help the borrower discuss the situation with more authority and this may further lead to the lender agreeing to a better rate for the existing home loan. This helps as from a lender’s point of view it is easier to retain an existing customer than to get a new one.
One could also opt for a balance transfer in case another bank or financial institution is providing a better rate, but such a decision should be taken only after weighing all the pros and cons. The borrower should get a clarification from the new prospective lender on all start-up fees involved with refinancing the existing home loan besides asking the existing lender to explain the costs involved in paying out the loan. The transfer process should only be initiated after there is a clear indication that the move will save money.
In today’s time, a good credit score helps the borrower negotiate his/her loan and interest rate, processing fees, pre-payment penalty and all the other charges involved while purchasing a property. Most banks and financial institutions believe that customers with a sound credit rating are less likely to default on the loan amount. Borrowers with salary accounts or credit cards can also avail further discounts on processing fees and prepayment penalties from banks.
In case one has a poor credit score certain steps should be undertaken to help set things right. One could take start making payments, whenever due without delaying them any further, by not utilising the maximum limit on your credit card , pay off any debt etc.
There is no substitute to effective documentation while availing home loans. This gives banks the confidence about the borrower’s credibility and repayment capacities thus helping in securing loans. The document filing is also an important step in this process as it is highly unlikely for a bank/lender to offer a best possible quote until the documents are submitted. One must be completely honest about existing debts, credit cards, and repayment history to all lenders to give a clear idea about their existing financial position. This will also help individuals to negotiate home loans better by enhancing their credibility as banks will also check the same with the Credit Bureau about the credit worthiness of the individual.
Another important point to keep in mind before availing a home loan is approaching prospective lenders only after the property is finalised and disbursement is required in the next few days. Most lenders are interested only in disbursements and reserve their best rates only for immediate disbursement cases.
Time your loan
Borrowers should look at timing their loans towards the end of the month or quarter for better rates. Banks and financial institutions have pre-defined sales targets for its staff towards the end of the month/quarter and may offer competitive rates to complete their targets.
One should also look at timing their loans towards the festive season as lenders tend provide incentives in terms of lower interest rates and processing fees during this period to encourage sales.
Bundling loan requests with friends & relatives to offer a larger business opportunity to banks and financial institutions is another tactic one can use for negotiating home loan rates. This is possible as banks and financial institutions would be saving on their legal and technical costs relating to property title, valuations, etc.
Getting a home loan is becoming a hassle free/simple procedure with financial institutions increasingly focusing on shortening the entire process. Lenders are giving applicants an option to fill the application form online besides providing on-ground assistance of home loan advisors to assist them. With the increasing competition, financial institutions may go all out to offer home loans at competitive rates and make the entire process simple, but customers should sign up for a home loan only after ensuring that they are getting the best deal from their financial institution.