RBI’s repo rate hike has had the biggest impact on home loan customers. Because, banks have not only increased the interest rate on home loans but also extended the loan tenure. The EMI amount has also increased.
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Let’s say a customer has a home loan of Rs 50 lakh for a tenure of 20 years. If till now he was giving home loan EMI at 7% rate, since repo rate increase, the EMI rate has become 9.25%. That is, the amount of EMI will be Rs. 38,765 to Rs. 45,793.
16.86 Lakhs will have to be paid in total as interest in such cases. 43.03 lakhs had to be paid as interest at the previous rate. It will increase to 59.90 lakhs. That is, a lot of pressure fell on the customer in one fell swoop. In this case partial payment or pre-payment early can reduce the burden of additional EMI.
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Let’s say 9.4% interest is payable on a home loan of Rs 50 lakh. The loan tenure is 15 years. This time, by making a partial payment of 7.5 lakhs, it is possible to reduce the interest on the loan by 17.73 lakhs. Not only that, experts say that it is possible to repay the loan before 48.6 months.
Another way is to reduce the total amount of interest charged on the home loan. In this case the EMI amount has to be increased. Let’s say you have a home loan of Rs 40 lakh for a tenure of 15 years. The interest rate is 9.25%. Currently the EMI amount is Rs.41,168. Now if this EMI is increased to Rs 50,000 then the loan tenure will be 10 years instead of 15 years and it will be possible to save a total of Rs 11.67 lakhs on top of the EMI.