RBI issued a moratorium period since March to provide relief to loan borrowers. This moratorium period initially was for 3 months and got extended for 6 months. This period ends on 31st August 2020.
If you opted for a moratorium period, then you will have to start paying your home loan EMI from 1st September onward. This is not all. You will also have to repay the interest amount that has been accumulated in the moratorium period.
Since this will become difficult for you, it’s high time that you start planning ways through which you can ease this burden and repay your home loan EMI.
Ask your bank to reduce interest rates:
In the past 2 years, Banks in India have reduced the repo rate by 225 basis points. Hence Home loans that were around 9% now have come down to 7%. Even though this rate has come down, many customers to date are paying home loans at 9%.
Why must you pay your home loan at higher interest rates? You can now discuss it with your Bank and get your interest rate reduced. This will help you save a lot of interest money and you have to repay a lower EMI.
E.g. Assume that your home loan is ongoing and you have to repay principal amount worth 30 lakhs in 180 months (12 years) @ 8.55% Interest rate. The EMI you will be repaying per month is approximately 29,600 rupees.
But if you discuss with the Bank and get your home loan interest rate reduced from 8.55% to 7.5%, your monthly EMI will reduce by approx 2,000 rupees per month. Here are 2 things you can do in such a situation.
Situation 1 – You can repay your new home loan EMI that has become less due to interest rate shifts. This will reduce the burden on you.
Situation 2 – You can continue repaying the old EMI amount as usual. Doing this will reduce your overall home loan tenure by 21-22 months i.e. almost 2 years. Isn’t that great?
Should I opt for the moratorium period if it gets extended?
As you now know, during the moratorium period, the interest component is added to your principal amount. This will indeed increase the burden on you later. Hence it’s highly advisable to not opt for the moratorium period and try your best to clear your dues.
Is there any other solution to this problem?
Yes, loan restructuring is one famous way of getting your Bank to discuss and change the terms of your loan. Here, the changes will increase the loan tenure and lower your EMI amount.
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