If you have taken a home loan, then there is good news for you! The Reserve Bank of India (RBI) has cut the repo rate twice in a row now. Earlier this week, the central bank slashed the interest rate by 25 bps to 6%. Before this, the rate was cut by a similar margin in February. And it is expected that this reduction may continue in the rest of the financial year 2025-26 as well.
Most home loans are nowadays given at floating rates, which are linked to the RBI’s repo rate. As soon as the repo rate is revised, most banks review their lending rates and try to adjust interest rates. But it is worth noting that not all borrowers get the full benefit of this, especially those with a low credit score.
Also read: RBI rate cut: You can now save Rs 7.65 lakh in 20 years on Rs 1 crore home loan – Here’s how
If you had previously taken a home loan with a low credit score, then now is the right time to reduce the EMI by reducing the interest rate. The following simple steps can help you:
- Check your credit score first
If you have paid EMIs on time in the last 2-3 years and there has been no default, then your credit score must have improved by now. If your score is 750 or above, then take the next step. If not, then work towards improving your score first.
- Check the interest rate of your home loan account
Log in to the portal of your bank or housing finance company and see how much interest they are charging you. If your credit score is 750+ and the bank is already offering loans at the lowest interest rate, then there is no need to do anything.
But if it is not so, then definitely take the next step.
- Appeal to the bank to reduce the interest rate
You can tell your bank by email or visiting the branch that your credit score has now improved and RBI has reduced the repo rate. Therefore, you want your interest rate to be revised as well.
If the bank refuses, you can tell them that you are thinking of transferring the loan. Often banks do not want to lose their old and good customers, so it is possible that they will give you a better deal.
- Transfer home loan
If your bank refuses to give a better interest rate, you can transfer your loan to another bank. For this, you will have to do some research and find lenders who are offering loans at a cheaper rate.
Arun Puri, Chairman of ANAROCK Group, says that if your bank is not giving the benefit of repo rate cut, negotiate for a lower interest rate or opt for balance transfer. However, keep your expectations realistic as the relief in EMI may be partial. It would be wise to invest whatever savings are made in EMI in prepayment or better investment, he suggests.
Keep in mind that processing fees and some other charges may also be levied on transferring the home loan. You can ask the new bank to waive these charges so that you get maximum benefit.
Also read: THESE 4 PSU banks cut lending rates following RBI’s repo rate announcement
If you have taken a loan on a fixed rate?
You can request the bank to shift you to a floating rate. Fixed rates are usually more expensive. But if you want the convenience and stability of fixed EMIs, then maintaining a fixed rate can also be an option.
In the end, let me say this much — now that interest rates are going down, you can get relief in your home loan EMI by showing some wisdom. A small step can turn into a big saving for you.