Smartly Reduce Your Home Loan Interest Rates

Repaying a loan, especially a home loan, can be challenging. Home loans are high-value loans with long tenures, resulting in significant interest payments over time.

High-interest rates can impact your financial stability and mental well-being. Therefore, planning and reducing your interest rates is essential. This helps you repay your loan quickly and effectively without feeling stressed.

Ways to Reduce Your Home Loan Interest Rates

1. Shorter Tenure: The loan term is crucial in determining the interest you pay. Longer tenures reduce EMIs but increase the total interest paid. Opt for shorter tenures to lower the overall interest. Use a home loan interest rate calculator to see the benefits of shorter loan tenure.

2. Prepayment: Prepaying your loan is an effective way to reduce interest costs and save money. For floating interest rates, there are no pre-closure fees on loan prepayments. Regular extra payments can significantly reduce the principal balance and, thus, the overall interest. However, check with your lender about prepayment fees for fixed-rate loans.

Consider a systematic investment plan (SIP) in equity funds to save money for prepaying your loan. Saving 10% of your EMI amount over the loan tenure can provide funds to pay off a portion of the loan.

3. Larger Down Payment: Lenders typically finance 75% to 90% of the property's value. Paying a larger down payment reduces the loan amount and, consequently, the interest you pay.

4. Maintain a Good Credit Score: A credit score of 750 or higher is viewed positively by lenders. A good credit score indicates your reliability and can help you secure lower interest rates.

5. Negotiate with Lenders: If you have a strong credit history or a good relationship with your lender, negotiate for lower interest rates. A steady income and no current EMIs can help you get loans at lower rates.

6. Home Loan Balance Transfer: Consider transferring your loan balance to a lender offering lower interest rates. This can save you money and offer better features like tenure adjustment, which impacts your monthly installments.

7. Compare Interest Rates: Before choosing a loan, compare interest rates from different lenders. Use third-party websites to get a clear idea of the rates and fees. This helps you find the best deal.

8. Increase EMI: Some lenders allow you to change your installment once a year. If your income increases, opt for higher EMIs to shorten the loan tenure and reduce the total interest paid.

9. Timely Payments: Ensure you make timely EMI payments. Missing an EMI can negatively impact your credit score and incur penalties. Set up a direct debit from your account to ensure timely payments.

10. Choose Floating Interest Rates: Floating interest rates adjust periodically based on economic factors, unlike fixed rates that remain constant. Floating rates are generally lower and can save you money if interest rates drop.


A home loan is a great way to buy your dream home, but high-interest rates can double your loan cost. Reducing your interest rates is a smart financial strategy to increase your savings. Use these tips to lower your EMI and interest payments on your home loan.