Loan Repay Tips When Interest Rates Rise

By SiliconIndia   |   Monday, January 30, 2012
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Bangalore: At present the interest rates are ever fluctuating, especially to mention, it is increasing. There are few questions which will arise in the borrower’s mind that what to do when the interest rates rises. Due to this, the money to pay will rise but not the monthly income of yours. The major impact of this hike will be that, the loan duration will be increased as you will have to pay a larger amount than you would have thought. Hence here are some tips you should do when the interest rates on your loans gets a hike.

Have a Word with Your Bank

In case of decreasing your EMI or to shorten the loan tenure - you should try having a proper word with your banker and discuss your situation of financial wealth which will affect your paying the EMIs. Discuss the situation with your bank which will bring your problem to a mutual and beneficial solution hopefully. Some banks and financial institutions do consider a request from a borrower who has a good repayment track record.

Increase the EMI

If you have the capacity to increase your EMI, then it would be a better thing to do. Raise your EMI and finish the loan as soon as possible. It will reduce the amount you would have to pay as an interest.

Prepay the Principal Amount

Some banks restrict specific percentage of fees on the principal amount, paid at maximum number of times a year, when you are paying partial principal amount of yours. Hence it will be a best thing to do be paying your principal amount first as it will close the loan very soon. But on those terms the loan taken, it should be very clear. If you have any extra wealth with you like bonus etc, which is laid idle in your bank account, make use of it and try paying the principal amount as soon as possible.

Switch the Loan to Another Bank

 It is another smart way to get out of this situation. Have a proper market search for what are the interest rates are provided by other banks and their switching factors and you can shift your loan process to another bank. But it is highly advisable that calculate whether it will be profitable for you or not. Generally the banks ask for a closing charge for rounding up the loan process. And your shifting will cost you some extra pence. Hence compute your profit and then go for this option. This process will not hunk you to pay higher EMI.

Not Good Time for Newbies to Take Loan

For those who want to opt for a loan, it is an awful time to go for it. Don’t ever go for a loan when the rates are already high. It’s better to wait for a while because the situation will be more worst if the interest rates get a hike in the near future.

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