Want to lower your loan EMI burden? Follow these simple tips

A person takes loan to fulfil his or her financial need. However, it must be borne in mind that a loan is also an added expense, considering the interest the bank levies. A higher rate of interest can make repaying your loan that much costlier. With a higher rate of interest, the amount of EMI which you have to pay goes up. With the RBI hiking the rate by as much as 90 bps in two tranches to rein in inflation, banks have followed the central bank to hike their lending rates.

But there are certain ways or tips that can help you save money on your loan EMI. From negotiating with your lending company to changing your lender, some ways listed below can ensure that your loan doesn’t hurt your monthly budget.

A hybrid loan is where the lender gives you loan with a fixed rate for the initial few years after which it starts charging the prevailing floating rate of interest. One can move to semi-fixed rates for first 3 years and later opt for floating rate of interest to ensure the interest rate fluctuation does not affect your loan tenor or EMI.

If home loan was taken before October 2019 then it is very likely that the interest rate regimen is MCLR or Base Rate or BPLR. After October 2019, all new loans were shifted to the external benchmark rate but the old loans were allowed to run under the existing system till the time borrowers applied for a change to the new regime. If your interest rate is higher than the lender's EBR then this may be the right time for you to switch to the EBR regime by paying a nominal fee.

Compare the interest rates being offered by various lenders. If the interest rate that you are paying is higher than other lenders despite a rate hike then it may make more sense now for you to switch to a new lender.

If you have been disciplined in repayment, then it's time reap the reward. Through home loan balance transfer, existing home loan borrowers with good credit profile should also explore the possibility of interest cost savings. Their improved credit profile may make them eligible for home loans at much lower rates from other lenders.

If you are finding it difficult to pay increased EMI, you can ask your lender to increase the tenure of the loan and reduce your EMI. The increase of tenure is typically allowed by the lender till the retirement age of around 60-65 years.

Some home loans give the borrower the option of overdraft. Home loan borrowers, both new and existing ones, having liquidity restraints can opt for the home saver option. Under this facility, an overdraft account is opened in the form of a current or savings account where the borrower can park his surplus and withdraw as per his financial requirements.