Negotiating Your Home Loan Rates – Painful Or An Easy Task?

Many home loan applicants believe that it is impossible to reduce the home loan interest rates that banks charge. The fact of the matter is that most banks offer different interest rates to different borrowers depending on their applications. Here are a few ways that you, as a borrower, can negotiate with your bank to reduce the interest rate charged:

1. Use an intermediate

If you wish to force your bank to reduce the interest rate charged on your home loan, operating through a broker is a good idea. Providing banks with your loan application with the help of an intermediate forces the bank to put in the extra effort to ensure you borrow from them. It is important that you conduct a detailed research and shortlist a few banks to which you send your home loan application. This also provides you with a variety and helps you choose the best deal offered. The reason is that the lender is aware that there are several other lenders available who are ready to provide you with an affordable home loan. Even though you have to spend on brokerage, the result with allow you to hold negotiations so that the bank and you are able to agree on a home loan interest rate that benefits you both.

2. Improve your credit score

Before banks offer you a home loan, the first document they look at is your credit score. Your credit history needs to be sound to ensure that your home loan application is approved. A sound credit score provides you with a stronger position from which you can negotiate better with the bank. However, if your credit score is not strong, you can spend a few months to build up your score. A few ways in which you can improve your credit score are:

* Avoid using the maximum credit on your credit card.
* Avoid applying for several loans together.
* If you are on the defaulters list in the CIBIL records, pay off your debt immediately.
* Try to pay off any liabilities that are currently tying you down.
* Make your payments on time.

3. RBI policy

The RBI has come down hard on banks that provide loans at different interest rates to loan applicants. Old customers are charged high interest rates while the bank uses low interest rates to attract new customers. The RBI now expects banks to provide detailed information as to how they plan to charge interest rates on home loans. The new policies of the RBI give the borrower more power in the negotiation of home loan interest rates.

It is now far simpler for a home loan applicant to negotiate interest rates with the bank. As long as you keep yourself well informed about the bank’s policies and inner workings, negotiating interest rates is no longer impossible.