You have bought a new home and have taken a loan on it. You pay an EMI which in the initial years comprises mostly of the interest. Now remember, interest is an expense that you’ll bear every month till the end of the loan tenure. So it is very important for you to save on your home loan.

Here are some tips to help you save on the home loan.

• Opt for a floating rate home loan. Usually floating rate home loans are cheaper than fixed rate loans.
• Use the loan comparison websites. There are many loan comparison websites that compare the loan offerings from various lenders. Go through these offerings and select the lenders offering the lowest possible interest rates on the loan.
• Read the terms of loan carefully. Does the loan prohibit you from prepaying it? Will you have to pay prepayment penalty to change the lender or to speed up the loan tenure? Does your lender offer you the latest terms that it offers to its new customers?
• If there is no prepayment penalty, try to prepay the loan whenever you have some extra cash. This will reduce the loan tenure and free you from loan quickly.
• Check out the processing fee, insurance charges and other expenses. All these expenses add up and increase the cost of loan.
• If there is no prepayment penalty, try to change the lender. This is because with stiff competition in home loan market, lenders keep on offering innovative products that can ultimately save you money.
• Try to take the smallest possible loan amount. This is because smaller the amount lesser the interest you end up paying.

Today debt is becoming common place all over the world. Even in India that originally boasted about having the highest savings rate in the world, debt is slowly spreading its tentacles. Many people, especially youngsters fall prey to the easy availability of the credit. If you are in this position, then here are some tips to get out of your debt.

• Inform your spouse/parents: This is the biggest mistake many people make. They hide their debt situation from their near and dear ones. Don’t do that. Discussing your financial problem with them will help you solve your debt problem.
• Draw a repayment plan: Chalk out a plan to repay your debt. Cut down on unnecessary expenses like shopping for latest gizmos, eating out at a restaurant or going to movies at a multiplex. Use the amount saved to pay off your debt.
• Switch over to low-cost loans: Replace the loans with high interest like credit card debt and personal loan to low-cost loans like loans against securities, NSC, KVP and mutual funds. It will save you the money by reducing your interest costs.
• Opt for one time settlement: Many banks would prefer settling outstanding dues with their creditors. They will try to offer you a settlement as they would be happy recovering even a part of their dues, instead of letting the entire sum go down the drain. If you get such an offer, opt for it. But ensure the bank gives you a settlement letter and declare the account closed.
• Restructure the loan: Banks let you restructure the loan,  in such a way that you pay higher EMIs when your financial condition improves. Write a letter asking the bank to offer you this facility.
• Declare bankruptcy: This should be your last resort and should be used when everything else fails. Approach the bank and declare your inability to pay and also tell them you don’t have any assets. The bank will then take up the matter with the court, who will then attach your assets like property. Then it will commence the liquidation procedure to pay the bank. It is a complex process that can last for 3 years.

You are in urgent need of cash. On one hand you have the option of withdrawing cash by using your credit card or opting for a personal loan. How do you choose the best  option? Which is the right choice for you?

The best part of taking cash against your credit card is that you don’t need any approval from the bank. You can get the cash whenever you want. All you need to do is go to your closest ATM and withdraw the cash. Also you can pay off the loan whenever you want. There are no prepayment penalties if you choose to pay the loan any time you so desire. But the major drawback of taking loan against credit card is exorbitant charges, levied by the bank. You not only have to pay cash withdrawal fees but also the interest on the amount withdrawn. This can make this loan very expensive.

On the other hand, personal loan needs your bank’s approval. You should have a good credit record to avail of this loan. Also if you are looking for immediate cash, this loan is not for you, as banks need some time to process your application. There is a processing fee, which is most cases is not refundable. So you end up losing money, in case your application is rejected. With the stiff competition amongst banks, you can look around for favourable loan terms. You may also have to pay prepayment penalty, if you decide to pay off the loan before its term is over. The advantage of loan is its comparatively low rate of interest.

Both credit card and personal loan do have their pros and cons. Which one you should go for? Well, it will depend on your circumstances. If you are need of immediate loan for very short period, then credit card is right for you. Otherwise personal loan is good for you, provided you have good credit record.

We all know that interest rates on loans tend to fluctuate. Even a small reduction in rate in the interest rate on home loan can end up saving you a substantial sum of money. Moreover with the stiff competition prevalent amongst lenders, you are sure to get a far better deal, if you opt to switch your home loan lender.

However changing lenders is not as easy as it sounds. You need to be aware of some things before you take the decision of changing the lenders. Here are some things to watch out for.

Weigh the savings vis-à-vis the costs of switch over: When you decide to change your lender, calculate the costs involved in transferring the loan. Most banks charge prepayment penalty that can completely wipe out your savings. Also the new lender will charge processing fees in order to process the loan. Watch out for these costs before you decide to change over.

Loan tenure: If you decide to change the lenders, either your EMIs may reduce or the loan tenure can reduce, if your EMIs remain constant. Though you may have to pay foreclosure charges, it is still worth it, since the savings will be significant.

Find out the duration for which the low rate is applicable: Most lenders offer low rates for the initial few years, after which it reverts to the bank’s actual rate. Most of the times, this rate is higher than what you are currently paying, so watch out.

Use loan comparison websites: With the advent of technology, you can compare the loan offers from different lenders in the convenience of your home. You can also find out how much you will save by switching the lender.

Quality of customer service: Find out if the lender can provide you with good quality customer service. Check its reputation on various websites offering user reviews. It will give you an idea of what to expect after switching over.
 
While it is great to change lenders in order to benefit from lower interest rates, you should also look at the above factors to get the best deal.