Business News Desk – RBI’s monetary policy is to be announced on 6th December. A reduction in repo rate may be announced in the policy. According to experts, this time RBI can cut the repo rate by up to 25 basis points (0.25%). You can also get a big benefit from this decision of RBI. When the Reserve Bank of India (RBI) cuts the repo rate, it directly impacts the EMI of your loan. If RBI cuts the repo rate by 0.25% (25 basis points), how much difference will it make to your EMI on a home loan of Rs 30 lakh? Also, if you want to end your EMI early, what steps can you take? Let us understand this through simple language and calculations.
Effect of repo rate cut on home loan
Repo rate is the interest rate at which RBI gives loans to banks. When this rate decreases, banks also make the loan cheaper, which impacts your EMI. understand with example
Home Loan Amount: ₹30 Lakh
Current interest rate: 8.50%
Loan tenure: 20 years
Current EMI: ₹25,846
If RBI cuts repo rate by 0.25% and banks reduce interest rate to 8.25%, your EMI will change like this:
New EMI: ₹25,386
Difference: ₹460/month
Meaning, you will save ₹460 every month. If we consider the changed interest rate as the basis, then this saving can be up to ₹ 1,10,400 in 20 years.
Easy ways to eliminate EMI
Make prepayment every year: If you have any bonus, tax refund or extra savings, apply it towards your loan. This will reduce your loan tenure and interest amount.
Increase EMI: As your income increases, increase the EMI slightly. This is the easiest way to repay the loan quickly.
Compare interest rates: If other banks are offering loans at lower interest rates, you can transfer your loan. But keep in mind the processing fees and other expenses.
Budget smartly: Limit unnecessary expenses and invest a major part of the savings in loan prepayment. This will reduce your loan tenure and result in huge savings on interest.
Benefits of repaying home loan early
Savings on interest: The sooner you repay the loan, the lower the interest. Keeping the loan for a longer period increases the interest burden.
Financial Security: A debt-free life enhances the feeling of financial security.
Investment opportunity: After repaying the loan, you can invest your savings in other profitable investments.
wait for 6th december
Now we will wait to see whether RBI cuts the repo rate or not. This will be decided by the monetary policy results on December 6. If there is a rate cut, your home loan EMI can be directly affected.
