With a change in the economic conditions & inflation the RBI alters the Repo rates for the banks. A reduction in the repo rates carries well news in itself for all home loan borrowers while even a slightest increase in the repo rates pinches the pockets of the borrowers. This is because the banks in no time increase the rate of interest for its borrowers with the increase in the repo rate by RBI, which further has an impact on his monthly EMIs.
While there is no easy way out to control the impact of these external factors, the following outlined 4 ways can help to minimise the effect of increased interest rates on your increasing EMIs.
1) Make Part- Payment Towards The Loan
Making a part-payment of the loan is
one of the best options as it will help to lower the overall interest outgo. Using
surplus cash to pay off the some part of the loan can be a good option for
those borrowers who are at the beginning of their loan tenure. The savings made on the interest
payable by the borrower more than make up for the interest he has to forgo.
2) Increase The Home Loan Repayment Tenure
Most borrowers are advised by the banks to increase their home loan repayment tenure that will help them to keep their EMIs intact. Most banks, by default, extend the repayment tenure. This can be a good option for a borrower who think an immediate money savings on EMI is his priority owing to manage the multiple debt outgo (when he has other obligations such as personal loan, credit card outstanding, society loan, mortgage loan, .etc along with the home loan.
3) Increase The Per Month EMI Outgo
It is important to note that when the rates are hiked & loan tenure extended, the interest outgo also increases. Therefore in order to save on the interest factor a borrower may request bank to hike his per month EMI to an amount he can afford to pay per month. This may contradict 2nd way of handling the increased interest rates, but ideally if the borrower increases the EMI and insist on reduction in loan tenure he will gradually pay less total interest amount over the loan tenure.
4) Switch Loan To A New Bank With Low Rate
Despite of the prepayment plans and rescheduling of the loan tenure if the rate hike still has a substantially high impact on the borrowers loan then there exists a need to explore transferring the loan to another bank that can offer a rate lower than the existing interest rate.
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