Banks Hike Home Loan Interest Rates. Here Are 3 ways to Control Your EMIs

After the recent hike in repo rate by RBI, several banks have increased the lending rate. Here is what to do

Home loan interest rates have risen on the back of an increase in key lending rates by the Reserve Bank of India (RBI). As soon as the banking regulator hiked the repo rate, several banks have also increased their lending rates.  For example, HDFC Bank has increased its Marginal Cost of Lending Rate (MCLR) by 10 basis points across different tenures. The bank charges now 8.40 per cent for one year.  State Bank of India (SBI), increased its MCLR rate by 10 basis points just before the RBI policy. For the period of one-year, SBI MCLR is now at 8.25 per cent.  As a result, either EMI has already gone up or is expected to go up soon. Here is a guide to help you deal with the problem of rising EMIs.

Increase the EMI amount

Banks generally increase the tenure of the loan when lending rates go up. If there is no financial strain, you can consider increasing your EMI amount over increasing the tenure of the loan. By restricting the tenure you can control the interest outgo resulting in the substantial amount of savings.

Go for prepayment

Do you know that banks do not charge you anything in case of a prepayment. Though it looks like a small gesture, but if undertaken it could lead to huge savings in the form of interest outgo. It makes more difference if you prepay the loan in first five years of taking out the loan. Moreover, it is advisable to prepay your loan than to invest money as it could lead to higher savings in the long run.

Change the lender

It is always good to look around for a good deal. Compared the home loan rate that you are paying with what other banks are offering. If the difference is substantial it makes sense to switch the loan. If the difference is not big do not transfer the loan as it could lead to unnecessary hassles. Ideally, the difference should be at least half the percentage.

The three measures discussed above can prove helpful at the time when EMIs are set to increase further,