The home loans normally are of huge amounts, and the interest seems to eat off a huge amount on its own from the income of the person taking the loan. The need for reducing the interest rates on home loans is basically to generate more disposable income.

Before taking the home loan, it is suggested that you do thorough research and find out the bank which offers home loans at the lowest interest rates. If you want to further reduce the payments, here are a few ways.

Switch home loan to MCLR (marginal cost of funds-based lending rate)

The MLCR regime offers better transmission of the policy rates of Reserve Bank Of India and better transparency than the other regimes. It can benefit you with resetting the pre-fixed repayment dates and ensures that the changes in lending rate during the loan tenure gets transmitted to the borrower once the loan’s reset date arrives. If your bank does not allow MCLR, then you can transfer you loan to a bank which offers this facility and benefit from this method.

Opting for home loan overdraft facility

The home loan overdraft facility allows you to deposit external money to your home loan account in addition to the normal EMI. This payment is treated as a pre-payment till the time it is withdrawn. You can keep you extra saving your home loan account and use it only when needed. Otherwise, it adds up to your EMI. Also, when you add more money, your interest payments and loan tenure will get reduced. But, you have to be careful while withdrawing a surplus amount from your home loan account as it will result in an increase of outstanding balance again and have higher loan interest.

Home loan prepayment


If you get an opportunity to do pre-payment for your home loan, do not miss it. Paying the loan back early will reduce the interest on home loans automatically. If you win a lottery or get a bonus in the office, you can use it to deposit the EMI early and then you can ease out for the upcoming EMI. This will help you reduce the interest on the home loan as well as make you pay the loan faster.

Compare the rates online regularly

The best way to get the lowest interest rates for home loans today is to surf the internet. Get to know about the various offers from different banks. The existing home loan borrowers should also be researching the internet from time to time to find out how much they are charges and what the market is charging. There are various websites which provide a summarized view of rates of interest, fee and other charges of different lenders. This will help you find a better deal before you opt for any loan.