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RBI repo rate hike: Make part-prepayments, increase EMIs to cushion interest rise impact | Simply Save

Home loan interest burden is set to increase post the RBI’s repo rate hike of 25 basis points. Consequently, EMI per lakh have risen 20-25 percent since the start of this rising rate cycle. Vipul Patel, founder at Mortgageworld, tells you how borrowers can now take some steps to reduce the total interest payable over the loan tenure, in this podcast. Tune in!

February 24, 2023 / 03:47 PM IST

Borrowers are a worried lot once again. Not only has the Reserve Bank of India (RBI)raised policy repo rate by 25 basis points once again, it has also left room for more hikes in the months to come.

Put simply, your loan interest burden could continue to mount even further. This is especially true for home loan borrowers whose loans are linked to repo rate. The RBI has cumulatively raised rates by 250 basis points since May 2022 and banks have passed on the entire hike to borrowers, pushing up their total interest payable.

Rates have hardened to a level where extension of loan tenure, which is typically the default option instead of EMI hikes, to absorb the increased interest burden is no longer enough. Borrowers are seeing their EMIs go up too.

So, what strategies can borrowers adopt to cushion the impact of this relentless rise in interest burden? Increase EMIs if your cashflow situation is comfortable, part pre-pay lump-sum amount by liquidating investments or switch lenders if you find better deals, says Vipul Patel, Founder, Mortgageworld, a loan advisory firm.

Tune into Simply Save for details.

Preeti Kulkarni
Preeti Kulkarni is a financial journalist with over 13 years of experience. Based in Mumbai, she covers the personal finance beat for Moneycontrol. She focusses primarily on insurance, banking, taxation and financial planning
first published: Feb 21, 2023 02:53 pm