Interest rates affect and determine the nature and magnitude of loans up to a large scale. This means your loan will be considered either as an asset or a liability, because of its interest rate. Loan schemes and plans are present in abundance in the market. However, inspite of attractive features and benefits, sometimes these loans come with a very high rate of interest. It is a widely known fact that banks and financial institutions use investment plans as a financial instrument to give out loans in the market. Therefore, the market conditions affect the rate of interest. So, investment plans and loan programs which are offered by a private financial company are more vulnerable to the existing or forthcoming fluctuations in the market.
Loans like home loans and business loans entail longer tenure and repayment process. So, it becomes essential for the loan borrower to find ways for decreasing the interest rate burden, because the loan will become painfully burdensome at the time of repayment. Here are some tips which could help you to reduce the burden of interest on your loan.
Report to the bank authority
At any point during your loan term if you feel that the rate of interest has been increased unceremoniously, express your concern. You can communicate your issues by sending letters or notes to the bank authority or meet in person. Sometimes concerns from customers can result in taking action from the bank’s end. This is because in the current times, companies have understood the importance of word of mouth PR and goodwill. So, in order to avoid sabotaging their reputation in the market among their competitors, banks and financial companies have become more prompt in resolving customer concerns.
Do your own research
Proactive approach is very beneficial when it comes to financial matters. Be a proactive loan borrower and always remain on the lookout. Banks and financial institutions keep introducing beneficial loan plans with reasonable interest rates and attractive features, in order to entice the new customers. So, if you are alert on those offers you can avail the same. This research will not be done in a week’s time. You must remain proactive in order to come across the right deal for you.
Choose a shorter tenure
Most of the people who do not come from a financial background, have trouble understanding the relation between the amount of EMI, loan tenure and rate of interest. The loan which is repaid for a longer period of time is charged at a higher rate of interest, for example; home loan interest rates. Always remember, shorter the tenure, lesser the interest. If the bank gives you an option to choose your EMI amount and loan tenure, always choose to pay a higher EMI. This will lead to quick repayment of the loan with reduced interest.