To counterbalance hike in lending rates

The soaring lending rates has been keeping the borrowers really busy, since last two years the lending rates have gone up by 200 basis points, the figures themselves describes the pain that the borrowers have gone through.

Due to the fluctuation in the lending rates the borrower now has to make continuous moves to counterbalance the effect of the hike in the lending rates, the borrowers that have opted for floating interest rates are the one that have been the worst hit. The same has created an urgency to manage the home loan according to the market situation so that the loan never has an upper hand on the borrower.

The best option to minimize the effect of hike is prepayment; not full but partial. A .person can also go for full prepayment if any other lender is ready to lend at considerably lower rates or if the borrower is not satisfied with the loan scheme or the lender, but that is another case.

The best thing about partial prepayment is that is does not attract any penalty, the amount prepaid is deducted from the principal amount that results in substantial decrease in the amount on which the interest is to be charged.

As a person necessarily can not have multiple sources of income from where he can arrange funds to prepay his loan, so he can leverage the benefits of Fixed Deposits and Recurring Deposits, through which he can earn interest rates that can be very helpful for a borrower to prepay a loan.

If a person does not have ample savings to prepay then he can ask his lender to increase the loan tenure, most of the times the lenders readily do that, as for the lender the long the loan tenure the more it will earn from the funds that it has lent to the borrower; but again there is no certainty about it as this option is only for the borrower that are not nearing the retirement age.

Another way by which one can manage his Loan is through step-up loan scheme. if a person in initial stage of his career or if is expecting considerable hike in his income in near future then he can opt for this facility. Borrower has to pay less EMIs in the beginning and as the fund inflow increases borrower can start paying more.