1. Raghuram Rajan keeps policy rates unchanged: 5 strategies for home loan borrowers

Raghuram Rajan keeps policy rates unchanged: 5 strategies for home loan borrowers

If you are home loan borrower, which is normally a long-duration loan, the question that would be bothering you is what your strategy should be till the next rate move by the RBI.

By: | Published: June 8, 2016 3:15 PM
home loan - RBI monetary policy review If you are home loan borrower, which is normally a long-duration loan, the question that would be bothering you is what your strategy should be till the next rate move by the central bank, which, by all indications, would be towards a further lowering of rates.

Reserve Bank of India Governor Raghuram Rajan maintained status quo on key policy rates in the Bi-monthly Monetary Policy Review on Tuesday including keeping the repo rate at 6.5 per cent. This, in effect, means that there would be no additional pressure on banks to lower lending rates.

If you are home loan borrower, which is normally a long-duration loan, the question that would be bothering you is what your strategy should be till the next rate move by the central bank, which, by all indications, would be towards a further lowering of rates.

FeMoney spoke to Adhil Shetty, CEO, BankBazaar.com who listed out 5 things on how a home loan borrower should deal with the current situation.

Be regular with your repayments: The most important thing is to pay your equated monthly instalments (EMIs) on time.

Consider prepayment: If you can, it would be prudent to prepay your loan and close it as soon as possible. This can bring you substantial savings on the interest you repay to the lender.

Consider reducing tenor if interest rate is favourable: In case your lender cuts the lending rates to transmit prior cuts, it is a good idea to continue with your current EMI and opt for a reduced tenor to avail higher savings instead of opting to reduce your EMI.

If loan rate high, renegotiate with lender: In case you are paying a comparatively higher interest rate, the first step would be to negotiate with your current lender to reduce your lending rates to bring them at par.

Consider switching if negotiations fail: In case negotiations over loan terms does not work in your favour, you may wish to consider transferring your loan to another bank. However, remember that loan transfers come with their own associated costs that can outweigh the benefits in situations where the difference in interest rates in low, in the range of approximately 10 basis points. So make sure you do a thorough comparison of the financial expenses and benefits as well as the terms and conditions of repayment.

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