How you can decrease your home loan EMIs?

HDFC home loan rates were revised last month as well.

A day after the Reserve Bank of India increased the repo rate by 50 basis point in order to stem the fast spiralling inflation, several home loan lenders, including HDFC, ICICI, Bank of Baroda, RBL and Federal Bank, have increased their home loan interest rates. HDFC, one of the country’s biggest lenders, said on Thursday its lowest home loans will now begin from 7.55 per cent, a whopping increase from 6.7 per cent in March. ICICI’s loan rates will now begin at 8.6 percent, whereas RBL’s at 8.55 percent. The EMIs of existing floating home loans will also increase. How you can keep your EMIs low?

There are many options for those who want to keep their EMIs low. A consumer can easily refinance her loan. Many lenders offer lower rates than the rates borrowers have got from their existing lender. A borrower can easily transfer the loan to the lender offering lower interest rates. Almost all the lenders offer this service. However, refinancing works if the borrower still has to repay a substantial amount of loan. There are associated charges as well. 

Another option the borrower has is pre-payment. All the lenders provide a pre-payment option. Borrowers should keep paying off money lump-sum so that the principal decreases substantially over years. Lower principal means lower EMIs. This also means a person’s loan will be closed earlier. Since most of the EMI comprises interest with a small principal component, prepayment facility makes a lot of financial sense.

Most of the banks offer loans with tenure upto 30 years. The most popular duration for loan repayment that borrowers opt for is 20 years. However, if one wants to lower EMIs, she can extend the tenure of loans. The downside of availing this is that she would have to pay a bigger interest amount. However, this also means freeing up more money for lump-sum prepayment.

If paying more EMI is not a problem, one can be prudent and increase her monthly repayment installment. This would help her repay the loan faster, which means she would have to pay lesser interest. 

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Divyansh Singh

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