• Increasing EMIs help you save on interest payment
  • Prepayment reduces EMI and the loan tenor
  • Home loan balance transfer helps you opt for a lender offering lower rates
  • Bajaj Finserv Flexi Hybrid Home Loan offers a principal holiday of 4 years

As financial institutions spike home loan interest rate following RBI’s back-to-back hike in repo rate, home loan borrowers have already started feeling the pinch. The high-interest rate will push up home loan EMIs, thereby forcing borrowers to make fresh calculations to accommodate the extra cash outflow every month. However, with these steps, home loan borrowers can reduce the impact of high-interest rate.

Increase EMI:

Though it may sound a little strange, increasing EMIs would help you make big savings in the long run. Often in such a scenario, borrowers tend to increase the loan tenor. Note that while doing so can lower the EMIs, it will significantly increase the interest outgo.

On the other hand, increasing EMIs keeping the tenor same, would help you, as a borrower, to make significant savings on interest payment in the long run.

Prepay:

Prepaying a home loan is another prudent way to cushion yourself from the effects of an increase in home loan interest rates. Prepayment brings down the principal amount, thereby reducing EMIs and also the loan tenor.

For example, if you are serving a home loan of Rs.50 lakh at 8% for a tenor of 20 years, you need to pay an EMI of Rs.41,822 per month. If you prepay Rs.2 lakh, your reduced EMIs come to Rs.40,149. Also, the tenor of the loan gets reduced close to 2 years. Thus, make sure to use any bonuses received or profits generated to prepay your home loan.

Home loans availed on floating interest rates don’t attract prepayment charges and penalties. You can determine the EMIs to be paid on your loan with the help of this home loan EMI calculator.

Look out for Home Loan Balance Transfer:

Home loan balance transfer is another way through which you can negate the effects of the increase in home loan interest rates. This option helps you transfer your outstanding loan amount to a new lender offering lower interest rates, thereby helping you make savings. Certain home loan balance transfers come with added advantages. For example, Bajaj Finserv Home Loan Balance Transfer offers you facilities of top-up loans, prepayment and 3 EMI holidays.

However, note that this move works only if you are in the initial phase of the home loan as it is during this time when interest outgo on the loan is higher than the principal. This reduces as you move forward in the tenor.

If you are on the verge of repaying your home loan, it’s better to stick to your original lender as you have mostly paid off the interest component of the loan. Making a switch they could be a costly proposition.

Find out about holiday period on either EMI component:

A home loan EMI consists of the principal and the EMI component. A holiday period of either of these components can reduce the burden on an increase in home loan rates. For instance, Bajaj Finserv Flexi Hybrid Home Loan gives you a principal holiday period of 4 years. It means for the initial 4 years, you need to pay only the interest as EMIs.

Only after 4 years, you pay the interest and the principal as EMI. Interest-only EMIs help you to better manage your finances and soften the blow of high-interest rate. Also, there are no charges on the number part-prepayment or withdrawals.

Also, pre-approved offers form Bajaj Finserv on a range of loans including home loan, business loan, personal loan, etc., availing finance is easy and quick. These offers cut down the lengthy documentation process. Share a few basic details to know your pre-approved offer now.

Published by Arina Smith