Tips To Reduce Your Home Loan EMI

If you have already taken a home loan, your EMIs must be debited every month. If you don’t have an existing loan and are planning to apply for a housing loan, it is important to know that you will be liable to make monthly EMI payments until your loan is completely repaid. For many people, EMIS takes up a majority of their monthly budget. In this article, we will have a look at how you can reduce your home loan EMI most efficiently.

Tips To Reduce Home Loan EMI

You can reduce the EMI of your housing loan in many ways. Here are 6 effective ways to reduce your monthly home loan EMI.

1. Transfer Your Loan To a New LenderThere: Several banks and lending institutions offer home loans. These lenders offer different benefits, such as home loan interest rates, tenure, fees, etc. So, if you have an existing home loan with a lender who charges a very high interest rate, you can transfer your home loan to a different lender that offers a lesser interest rate. Reduce home loan interest rate to pay lesser monthly EMI. Most home loans are offered on a floating interest rate basis and have no penalty on transferring your loan. So, the only cost that you will have to bear is the fee that is charged by the new lender.
2. Change From Fixed To Floating RateIf you opted for a housing loan with a fixed interest rate, you are more likely to pay a higher home loan EMI than required. So, opt for a floating interest rate as lenders usually charge about 1% to 2% higher with fixed interest rate home loans.
3. Extend Your TenureIf you are not in a financially sound position to pay high EMIs, you can opt for an extension of your tenure. This can help you stretch out your payments over a longer period of time. It can also help lift the pressure of paying higher EMI and provide you with some relief. For example, if you have to repay ₹40 Lakhs at an interest rate of 7.5% over a period of 10 years, then your EMI would be higher when compared to a tenure of 20 years. With a tenure of 10 years, you would have to pay ₹47,481. Whereas, with a tenure of 20 years, you would only have to pay ₹32,224 every month, which is ₹15,257 less than the EMI you have to pay on a 10-year tenure.
4. Make Use of Loan RestructuringThe Reserve Bank of India (RBI) provides the option to restructure loans. This initiative was introduced during the pandemic when many could not pay their EMIs. In response, the RBI allowed borrowers to opt for a moratorium, with which they could waive their home loan EMI for a certain period of time and restructure the loan accordingly to a suitable repayment schedule later.
5. Switch to External BenchmarksThe Reserve Bank of India introduced external benchmarking to bring in a more transparent and standardized methodology. All banks are mandated to adopt external benchmarking when it comes to retail loans and MSME loans. However, banks also have the option to extend the method of benchmarking to other loans, such as home loans. Switching to a bank that follows external benchmarking for home loans can help you avail of a floating interest rate and save on your financial expenditure.

In Conclusion

While availing of a home loan, it is important to be consistent with your home loan EMI repayments. If your EMI payments are high, there are plenty of ways to reduce your home loan EMI. It is wise to research before choosing a home loan so that you can pick one that offers the best home loan interest rates so that your EMI payments stay affordable. If you are looking to apply for a home loan, Piramal Finance can help you plan your home loan.