Your home loan deserves 30 minutes (Part 2)

The tougher 15 mins

Once the new (lower) interest rates have been applied to your loan, you have two options.

Given your successful negotiation on interest rates, banks deploy their second weapon: loan tenure.

What you need to know is that you have an option.

An option, to keep paying the old EMI and use the lower interest rate to reduce your loan tenure. Here’s the impact.

So how should you proceed

  1. If your income is extremely stable and secure (remember these are unpredictable times), consider keeping your EMI the same as before and instead, reduce your loan tenure. You stand to reduce your interest burden.
  2. If you are not so sure about your income, just stick with the reduced EMI and the old tenure. If possible, start putting aside some money every month. Once you have a decent amount, use it to make part payments toward your loan and reduce your principal amount.

Under no circumstances should you put pressure on your monthly cash flow. Times are tough, and it’s better to err on the side of caution.

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