Question 1

Does making a part-prepayment reduce my EMI or loan tenure?

Accepted Answer

By default, most Indian banks reduce your loan tenure while keeping the EMI constant. This saves you the maximum amount in interest. You can explicitly request the bank to reduce your EMI instead if you need monthly cash flow relief.

Question 2

What is a reducing balance EMI?

Accepted Answer

A reducing balance EMI calculates interest only on the remaining loan principal each month. As you pay down the principal, the interest component shrinks, and the principal repayment component grows over time.

Question 3

How do RBI repo rate changes affect my home loan?

Accepted Answer

If you hold a floating rate home loan, a repo rate hike by the RBI will increase your bank's lending rate. Banks typically extend your loan tenure rather than increasing your monthly EMI to absorb this cost.