If you have a running home loan or vehicle loan EMI, then you must likely be paying a little more next time,e as the Monetary Policy Committee of the Reserve Bank of India (RBI MPC) increased the repo rate by 0.25 per cent (25 bps) to 5.5 per cent. The uptick in the repo rate is a clear indication that the monthly payout for home loans, car loans, and personal loans through EMIs will go up, weighing on the pockets of consumers.
Meanwhile, if you might be thinking of reducing the burden of your home loan, then you need to shift your repayment strategy–even if you plan to take a loan in the current scenario.
3 Top Strategies To Reduce Loan EMIs
1. An Uptick In EMI amount
Whenever the repo rate increases, banks often offer to extend the loan tenure by one to two years while keeping the monthly EMIs unchanged,d and this turns out to be most costly for borrowers. To avoid this, instead of asking the bank for an extended loan term, you can slightly increase your monthly EMI amount. This will ensure your loan is repaid on time and save you from paying lakhs of rupees in interest.
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2. Prepayment option will help
If you have some savings or idle money in your bank account, then it can be used to prepay the loan principal. Prepaying just a small chunk of your total loan balance each year could completely offset the impact of a minimal repo rate hike. If you do it every year, this can help repay a 20-year loan in 13 to 14 years, saving significant interest.
3. Bank Transfer and Spread Negotiation
If you have a good CIBIL score above 780 or 800 points and have a stable income as well, you can find an option to negotiate. First, you can ask your bank to reduce your spread (interest rate difference). If the bank refuses, you can transfer your loan to another bank offering a lower interest rate. A saving of 0.25% to a large loan amount can yield benefits worth lakhs.