Understand How You Can Decrease the EMI Payment on Your Current Home Loan


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Home loan emi

For housing loan borrowers, the last few years has proven to be quite dynamic. With RBI announcing its fourth repo rate cut in 2019 by 35 basis points, the MCLR of financial institutions has reduced considerably. That is why the interest rate levied on housing loans has also become more competitive.

While the decrease in interest rates has come as good news for potential borrowers, many of the existing borrowers are still stuck paying EMI according to their previous interest rates. However, there are a few methods you can implement on your current loans to reduce interest payment. For instance, prepaying the loan is one of the ways through which you can reduce their interest payment. Additionally, using tools like home loan prepayment calculator have made the process of prepayment considerably easier.

The following are some of the ways through which you can cut back your interest payment.

  • Switching to Floating Interest Rates

Even with most financial institutions offering credits with floating interest rates, there are individuals who still pay interest according to fixed rates. When you repay your loan according to fixed interest rates, you usually end up paying much more with current lending rates of financial institutions. Thus, choosing between floating and fixed interest rate becomes much easier as you pay less interest with floating interest.

Additionally, availing the MCLR-based floating rate allows better transmission of the RBI’s policy benefits and also offers a higher transparency level to lenders.

  • Make Use of Home Loan Prepayment Rules

Prepaying your loan amount can help you reduce the interest payment on your existing advance. Using a home loan prepayment calculator, you can check the positive impact of the early repayment of your credit.

You can opt to prepay your loan amount in full or part if you have a reserve or extra cash flow. If you repay your loan in advance, you can save on the total amount you pay as interest. Most financial institutions do not have any limitation on the maximum amount of prepayment of home loans. However, they can levy some additional prepayment charges. So if you choose to prepay your loan in advance, make sure you check the additional charges.

  • Opt for a Balance Transfer Facility

You can also reduce your interest amount by availing loan balance transfer facilities. A balance transfer refers to borrowers choosing to transfer the outstanding amount of their existing debt from one lender to another.

With financial institutions offering competitive interest rates, availing this facility can help you to reduce your interest payment by quite a margin. Like a home loan prepayment calculator, you can make use of a balance transfer calculator to know the new loan amount you are eligible to pay.

However, before you choose a home loan balance transfer facility, make sure that you have full knowledge of the charges that your financial institution levies on you for availing this facility.

  • Compare the Interest Rates Regularly

If you don’t check the interest rates offered by financial institutions regularly, it is a good idea to start doing it. Keeping track of current housing loan rates can help you to check if you are availing the best rates offered. If you find another lender providing a better rate, you may consider shifting your outstanding debt to that lender.

You can pay a lower interest amount on your existing home loan in these four ways. However, it is crucial to put in ample research into each of these facilities before availing them. If you make any mistake in the process, it may end up costing you more.


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