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Smart Ways to Reduce Home Loan EMI and Save Lakhs in Interest
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News18•08-10-2026, 09:37
Smart Ways to Reduce Home Loan EMI and Save Lakhs in Interest
- •The Reserve Bank of India recently raised the repo rate by 0.25 percent leading to higher loan interest rates and increased EMIs
- •Instead of extending the loan tenure when rates rise slightly increasing your monthly EMI amount can save you lakhs in interest
- •Making a prepayment of just 5 percent of the outstanding loan amount annually can help neutralize interest rate hikes and shorten loan duration
- •Converting your home loan into an overdraft facility allows you to lower interest costs while keeping emergency cash accessible
- •If your CIBIL score has improved negotiate a lower interest rate spread with your bank or consider transferring your balance to another lender
Key Questions Answered
On Wednesday, October 7, 2026, the Reserve Bank of India raised the repo rate by 0.25 percent, or 25 basis points, bringing it to 5.5 percent.
Making an annual prepayment of just 5 percent of the total outstanding loan amount can completely neutralize the impact of a 0.25 percent interest rate hike, allowing a 20-year loan to be paid off in 13 to 14 years while saving a large amount of interest.
A home loan overdraft facility links a current or savings account to your loan, allowing you to deposit extra cash. The bank calculates interest only on the remaining balance after deducting your deposited funds, and you retain the flexibility to withdraw the money during an emergency.
