8 Tips To Lower Your Home Loan EMI As Repo Rate Remains Unchanged

Even though the repo rate (the rate at which RBI lends to banks) hasn’t changed this time, it means that your home loan EMI is not expected to go down soon. While a change in the repo rate by the RBI influences borrowing costs, there are various strategies you can employ independently to manage home loan repayments more efficiently.

As the repo rate remains unchanged, homeowners can still take proactive steps to potentially lower home loan EMIs (Equated Monthly Instalments).

Also Read: RBI Keeps Repo Rate Unchanged, Will Home Loan EMI Burden Ease Or Increase?

From exploring balance transfer options to negotiating with lenders and making strategic prepayments, this guide outlines actionable steps for homeowners seeking to alleviate the burden of their home loan EMIs. By understanding these strategies, you can navigate home loan commitments with greater financial flexibility and control.

How repo rate impact home loan EMI?

The repo rate is the rate at which the Reserve Bank of India (RBI) lends money to commercial banks for a short term, usually to manage liquidity in the banking system. When the RBI decreases the repo rate, banks can borrow money at a lower cost, which encourages them to lend more to consumers and businesses. When the repo rate increases, borrowing becomes more expensive, leading to less lending.

The repo rate has a significant impact on home loan rates because it influences the cost of funds for banks. When the repo rate decreases, banks typically pass on the benefit to borrowers by reducing the interest rates on loans, including home loans. This makes borrowing cheaper for individuals seeking to purchase homes or avail of other forms of credit.

On the other hand, when the repo rate increases, banks may raise their lending rates, making loans, including home loans, more expensive for consumers.

Here are some steps you could consider to manage your EMI;

1. Opt for Home Loan Balance Transfer: If other banks or financial institutions are offering lower interest rates than your current lender, you can consider transferring your existing home loan balance to avail of the lower rates. However, do factor in any associated processing fees or charges before making the decision.
2. Negotiate with Your Current Lender: Sometimes, lenders are willing to negotiate the interest rate or offer special schemes to existing customers to retain them. It’s worth reaching out to your lender to discuss whether any such options are available.
3. Make Part Prepayments: If you have surplus funds, consider making part prepayments towards your home loan. This can help reduce the outstanding principal amount, thereby potentially lowering your EMI amount or the loan tenure.
4. Increase the Loan Tenure: Extending the loan tenure could reduce your EMI burden. However, keep in mind that while this reduces the monthly payments, it might increase the overall interest payable over the life of the loan.
5. Check for Special Schemes: Some lenders offer special schemes or discounts at certain times. Keep an eye out for such offers and see if any are available to you.
6. Maintain a Good Credit Score: A good credit score can often fetch you better deals on loan interest rates. Ensure that you maintain a healthy credit score by paying your bills and EMIs on time and managing your credit responsibly.
7. Consider Switching to a Floating Rate: If you are currently on a fixed interest rate, consider switching to a floating rate. Floating rates are linked to market conditions and can decrease if the repo rate or other benchmark rates decrease in the future.
8. Review Loan Terms and Conditions: Periodically reviewing your loan terms and conditions may reveal clauses that can help you reduce your EMI burden, such as the option to convert from fixed to floating interest rates or vice versa.

Remember to carefully evaluate each option based on your financial situation and long-term goals before making any decisions. It’s also a good idea to consult with a financial advisor to understand the potential impacts of these steps on your overall financial plan.