This Hack Can Save You ₹50,000+ on Your Loan Repayment

Are You Paying Too Much on Your Loan Without Realising? Home loan interest is not just a number. It quietly eats away lakhs from your savings. You borrow ₹30,00,000, thinking it’s manageable. 

Twenty years later, you realise you've paid ₹25,00,000 extra in interest. Now imagine saving ₹50,000, ₹2,00,000, or even ₹10,00,000, without refinancing, switching banks, or doing anything drastic.

Sounds odd, right?

This isn't a scheme or trick. It's a smart adjustment, backed by RBI’s recent rules and a better understanding of loan structure. This blog walks you through how changing one thing in your EMI plan can save you lakhs.

Let’s understand what most people miss, and what you won’t after reading this.

RBI Rule Change: More Control, More Savings

Borrowers in India usually don't touch their loan settings after the paperwork is done. That’s the mistake. When interest rates change, banks often extend your loan tenure without asking you. This looks harmless on paper. But it means you keep paying interest for more years — that’s where you lose lakhs.

The Reserve Bank of India (RBI) has introduced regulations that allow borrowers to choose between increasing their Equated Monthly Instalments (EMIs) or extending the loan tenure when interest rates rise. 

This flexibility can lead to significant savings. For instance, a borrower with a ₹50 lakh home loan can save up to ₹33 lakh in interest by increasing EMIs instead of extending the tenure.

Now, RBI says banks must let you choose: increase EMI, extend tenure, or both. That one choice can change your entire loan journey.

Let’s say:

Difference? ₹16,00,000 gone for nothing.

Just increasing your EMI by ₹2,500 each month could’ve saved it.

So the big learning? Don’t blindly agree to tenure extension. Always ask your bank for an EMI increase option first.

Choose EMI Hike, Not Tenure Stretch

This method works because more of your EMI goes towards principal, not interest. Longer the tenure, more the interest piles up.

Let’s break this down.

Table:

Just ₹2,400 extra per month — but look at that ₹15,00,000 saved.

For many families, this means earlier home ownership, less stress, and better planning. In cities like Mumbai and Bengaluru, this saving could mean a down payment on your second property.

Also, this hack doesn’t need negotiation. You just need to ask your bank — RBI backs you.

Shift to EBLR for Smarter Interest

Another underrated move? Switching your loan rate to External Benchmark Lending Rate (EBLR).

Most borrowers are still on MCLR or base rate. These rates don’t drop fast when RBI reduces repo rate. But EBLR? It reacts almost instantly.

Real Example:

Just by switching from MCLR to EBLR, EMI drops, and total savings hit lakhs.

Banks might charge a one-time switch fee. But that fee is nothing compared to what you save. Ask your lender, fill one form, and that’s it.

Use Rate Cuts to Prepay Smartly

RBI dropped repo rates recently by 50 bps. This means lower lending rates. But most people only wait for lower EMIs. A better plan?

Keep paying same EMI even after rate cut.

Let’s say your EMI was ₹42,000 before the cut. After rate drop, bank reduces it to ₹40,000.

Instead of celebrating, continue paying ₹42,000. That ₹2,000 goes straight to principal every month.

Same money. Just smarter planning.

This method trims your tenure and shaves off interest. You’ll be debt-free years earlier.

Yearly Prepayment Trick

If you get bonuses, use them for lump-sum prepayments.

Even ₹1,00,000 per year can reduce your interest by over ₹10,00,000. Do this every year and you’ll finish a 20-year loan in 13–14 years.

Snowball it. Every year saves more than the last.

This approach is for working professionals who get appraisals or bonuses regularly.

Don’t Forget These Tiny But Powerful Tips

• Auto Debit EMIs: Avoid late fees. Banks give 0.25%-0.50% benefit sometimes.
• Check Annual Loan Statement: Ensure your bank adjusted prepayments correctly.
• Use EMI calculators: Small changes make big differences.

Conclusion 

Your home loan is not a one-time decision. It's a dynamic expense that changes with every RBI policy, every interest revision, every rupee you prepay.

The ₹50,000+ savings hack is simple: don’t extend tenure blindly. Don’t let the bank decide for you. Step in. Ask questions. Adjust EMIs. Prepay when possible.

Make your loan work for you, not the other way around.

Because every rupee saved on interest is a rupee earned for your future.

FAQs

1. What is the best month to prepay my home loan in India?
Ideally, prepay just after your annual EMI reset in April. That way, more goes towards principal before the new interest cycle builds up.

2. Does loan prepayment affect my CIBIL score?
No, in fact, it improves it. Early repayment shows financial strength and lowers your credit utilisation ratio.

3. Can I switch from MCLR to EBLR anytime?
Yes, most banks allow this. You may need to pay a nominal administrative charge, usually under ₹5,000.

4. Should I prepay the loan or invest that money?
If your loan interest is over 8% and your investment yields less, prepay. If you can consistently beat 9% returns, then invest.

5. Can I negotiate my home loan interest rate?
Yes, especially if you’ve had a good repayment history. Walk into your branch and ask for a lower rate. Show competing offers if needed.

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About the Author

LoansJagat Team

We are a team of writers, editors, and proofreaders with 15+ years of experience in the finance field. We are your personal finance gurus! But, we will explain everything in simplified language. Our aim is to make personal and business finance easier for you. While we help you upgrade your financial knowledge, why don't you read some of our blogs?