Repo rate has decreased but your bank has not reduced the interest, what are the ways to reduce EMI now, how will you get the benefit

What is Loan Transfer: After the reduction of repo rate, most of the people are expecting reduction in the interest rates and EMI of their loans. But, some banks have not yet reduced the interest rates and for such customers, this is a big problem. 

Loan balance can be transferred to reduce EMI.

Highlights

• Repo rate was cut by 0.25%.
• Some banks did not reduce interest rates.
• EMI can be reduced by loan balance transfer.

New Delhi. After a long gap, the Reserve Bank has finally cut the repo rate by 0.25 percent. Along with this, the interest rates of retail loans of banks like home, auto and personal loans have also come down. After this move of RBI, most of the banks have also started reducing the interest rates of their loans. Despite this, if your bank has not cut the interest rates, then there are still options to reduce the EMI.. After a long gap, the Reserve Bank has finally cut the repo rate by 0.25 percent. Along with this, the interest rates of retail loans of banks like home, auto and personal loans have also come down. After this move of RBI, most of the banks have also started reducing the interest rates of their loans. Despite this, if your bank has not cut the interest rates, then there are still options to reduce EMI.

In fact, nowadays the interest rates of most of the bank loans are linked to external benchmarks like RBI's repo rate. Therefore, with the reduction in the repo rate, the interest rates of the banks also fall. This is the reason that with the reduction in the repo rate, retail loans also become cheaper and your EMI also decreases. However, some banks have not reduced their interest rates, if the customers taking loans from these banks want, they can reduce the interest rates by switching their loan or through balance transfer.

What is loan balance transfer?

If your current bank is running a loan at a higher interest rate, then you can look for a bank whose interest rates are lower. In such a situation, you can save a lot of money by transferring the remaining amount of your loan to a new bank. This process is called loan balance transfer. Nowadays most of the banks are providing this facility. Under loan balance transfer, the new bank offers lower interest to the customer, which also helps them in reducing the EMI. If your current bank is running a loan at a higher interest rate, then you can look for a bank whose interest rates are lower. In such a situation, you can save a lot of money by transferring the remaining amount of your loan to a new bank. This process is called loan balance transfer. Nowadays most of the banks are providing this facility. Under loan balance transfer, the new bank offers lower interest to the customer, which also helps them in reducing the EMI.

What is the benefit of this?

In most cases of loan balance transfer, the other bank offers lower interest rates, which helps in reducing the EMI. Suppose your home loan of Rs 30 lakh is running at 9.50 percent interest. If you have transferred its balance to a bank offering lower interest i.e. 8.50 percent, then the interest rate will be reduced by 1 percent. If you had taken a loan for 20 years, then according to the old interest rate, you were paying Rs 27,964 as EMI and you will have to pay a total of Rs 37,11,345 as interest. At the same time, after balance transfer, the interest rate will become 8.5 percent and the EMI will come down to Rs 26,035. In this way, there will be a saving of about 2 thousand rupees, which will be about 24 thousand rupees annually and only Rs 32,48,327 will have to be paid as interest, which will save about Rs 4.5 lakh. In most cases of loan balance transfer, the other bank offers lower interest rates, which helps in reducing the EMI. Suppose your home loan of Rs 30 lakh is running at 9.50 percent interest. If you have transferred its balance to a bank offering lower interest i.e. 8.50 percent, then the interest rate will be reduced by 1 percent. If you had taken a loan for 20 years, then according to the old interest rate, you were paying Rs 27,964 as EMI and you will have to pay a total of Rs 37,11,345 as interest. At the same time, after balance transfer, the interest rate will become 8.5 percent and the EMI will come down to Rs 26,035. In this way, there will be a saving of about 2 thousand rupees, which will amount to about 24 thousand rupees annually and only Rs 32,48,327 will have to be paid as interest, which will save about Rs 4.5 lakh.

When does one get the benefit?

A customer should keep some things in mind while transferring the balance. The most important thing is to keep your CIBIL score strong, so that the other bank offers you loan transfer at a lower interest rate. Apart from this, many banks also charge a fee for balance transfer, so you should decide on it only after assessing your profit and loss. You get the benefit of balance transfer only in the initial stage of the loan, when banks charge a large part of your EMI as interest rate.. A customer should keep some things in mind while transferring the balance. The most important thing is to keep your CIBIL score strong so that the other bank offers you loan transfer at a lower interest rate. Apart from this, many banks also charge a fee for balance transfer, so you should decide on it only after assessing your profit and loss. You get the benefit of balance transfer only in the initial stage of the loan, when banks charge a major part of your EMI as interest rate.