Introduction

  • The COVID 19 crisis and imposition of lockdown has severely affected the cash flows for making regular loan payments which emerged as a challenge for many people.
  • It has become really tough for the home buyers to manage their monthly EMI which is generally very high.
  • The burden is on the salaried or self-employed person from a middle class or upper-middle class. 
  • There are certain consequences such as job losses or payout cuts that are experienced by the person in these hard times.
  • However, in good times, there is not much stress for paying EMIs on time, whether a person is a salaried or self-employed person.
  • In common, there is one of the expenses that most of the people in India are facing is home loan EMI.
  • Now, it has become impossible up to some extent to have a home of your own in today’s time.
  • The increase in the costs of real estate has made sure that almost every person apart from the income capability has to avail home loan to fulfill their dream of home.
  • In this article, we will learn about some ways to manage your EMIs in these hard times.

Choose and Change your loan lender

  • This is very important for every homebuyer who is taking a loan, to choose the lender bank wisely.
  • It might be a case in which you have chosen a bank lender who has offered a high home loan interest rate but you also have an option to switch on to a new lender in mid loan who is willing to provide lower interest rates.
  • Also, the lender is ready to extend your tenure for repayment.
  • Prior to change lenders, calculate your home loan EMI to have proper information regarding the EMIs and their reduced rates.

Alterations in the lending rates

  • Generally, home loans are connected to the two kinds of Lending rates i.e. Marginal Cost and Repo rate.
  • In the year 2019, all loans that are having floating rates it is compulsorily by the Reserve Bank of India to interlink the respective home loans to an external rate of the benchmark.
  • It is the sole discretion of the bank to opt for which lending rate. Most probably, banks have opted for an external benchmark that is Repo linked lending rate.
  • On the contrary, whenever RBI imposes cut-offs on repo rate, simultaneously, there is a fall in the interest rates of home loans that are interlinked with the Repo lending rates.
  • On the reduction in repo rates, banks work faster to provide relaxations to their customers.
  • This relaxation depends upon the time limits such as if the home is availed before the month of September in the year 2019 then there is high proximity of linking the home loan to the Marginal Cost lending rate.
  • In such a situation, the home buyer on loan does not get relaxation and benefits on reduction in interest whenever the Reserve Bank of India cut down repo rates.
  • In the COVID 19 times, the RBI is very concerned and generous in reducing the rate cuts. Likely, in the home loan interest rates that are revised every week since the pandemic started.
  • Therefore, switching to a Repo rate lending rate is a good option available to the home buyers in the present situation.
  • Adopting this approach will save your time and money by lowering the EMI and reduction in the loan repayment tenure.

Help in the pre payment

  • Recently, several banks and Non-Banking Financial Companies have put an end to the pre-payment fees and charges for the interest of borrowers to repay a huge amount for their home loans before the tenure ends.
  • In order to lower the interest charged on the EMIs, the Borrower shall prepay the home loan amount at the repayment tenure.

Availing EMI moratorium

  • In a situation in which a home loan is linked to the Repo rate linked lending rate and the situation is not in your favor in terms of the financial position then the person shall avail an EMI moratorium provided by the Reserve Bank of India.
  • However, this is only for the month of March to May in which you will have to pay the interest payable of all three months after the moratorium is over.
  • After the moratorium period is over, the EMIs would be increased but you can still choose to pay the same as before with the longer repayment.
  • Although, this will give a three month holiday for saving money and to look for a job lost in the pandemic.

Savings can play a helping role

  • Recently, the Government has allowed the withdrawal of 75% of the total credit balance of three months of basic and dearness allowance whichever is less from your Employee’s provident fund account which is non-refundable.
  • However, this might reduce the savings at the time of retirement. In this crisis, it is an efficient way to manage the home loan EMIs.

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