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.