In view of upwards revision of interest rate what option i should give to bank for EMI payment of home loan.
option given by bank is as under:
i) Pay lumpsum amt to continue with present EMI
ii) Increase in loan tenor with increase in EMI
iii) Increase the EMI to pay the loan within the existing tenor
Ans: You should consider the following factors to cope with finance in the revised hiked interest rate regime:
• If you have money lying idle in your bank account or have some random investments earning low yields, put it to good use. Make lump sum amount and also consider loan prepayment, which will substantially reduce your overall interest payment and helps to save interest on the loan.
• If you could afford to increase the EMI to pay the loan to maintain the loan tenure, you should go for that.
As a thumb rule, don’t opt for a loan tenure beyond 15 years. Beyond that, interest liabilities shoot up without offering commensurate benefits in the form of lower EMI. The decision to go for lump sum payment or increasing EMI depend on your upcoming requirement, goal priority and commitment’s as well. Thus, ideal situation is due cashflow analysis.
