New Delhi: If you are troubled by the high EMI and interest burden of home loan, then this news has brought relief for you. The Reserve Bank of India (RBI) is going to announce the monetary policy on Wednesday and it is believed that the repo rate may be cut by up to 0.25 percent. This will reduce the interest rates of home loans in the coming months and lighten the burden of your EMI. But do you know that a smart trick to repay home loan before time can prove to be more beneficial for you? Let’s understand this in detail.

Why is early payment beneficial?

Paying home loan EMI early not only reduces the pressure on your pocket, but also makes huge savings in the long run. When you make a pre-payment, the principal amount of the loan decreases. This reduces the interest burden and also shortens the loan period. Finance expert Ajay Mehta says, “Pre-payment is a step that can free you from the interest trap. If you have extra money, it is wise to invest it in repaying the loan.” For example, if you have a home loan of Rs 50 lakh at 9% interest for 20 years, then you pay more than Rs 50 lakh as interest. But if you pay Rs 2-3 lakh extra every year, the loan can be over in 10-12 years and lakhs will be saved in interest. Impact on CIBIL score too The benefit of pre-payment is not limited to saving interest only. It also strengthens your CIBIL score. CIBIL score is a measure of your credit worthiness, which banks look at while approving a loan. A score above 750 can get you a better interest rate. A bank official said, “People who repay the loan on time have a better record. This makes it easier and cheaper to take a loan in the future.” The game of repo rate and floating interest

Till April 2025, home loan interest rates in major banks like SBI, HDFC, ICICI and Kotak are between 8.25% to 10.25%. If RBI cuts the repo rate, then the interest rates of floating rate home loans will also come down. Rishi Anand, MD and CEO, Aadhar Housing Finance Limited, says, “There is no penalty on pre-payment in floating rate loans. This is a golden opportunity for loan holders. With the reduction in repo rate, the interest will be reduced, and you can save more by pre-payment.”

Floating rate is the interest rate, which fluctuates with the RBI’s repo rate. If the repo rate increases, the EMI increases, and it decreases when it decreases. In such a situation, pre-payment can further lighten your EMI.

The path to financial freedom

Early payment of home loan is not limited to just reducing the interest. It also secures your financial future. When you get rid of the loan early, your monthly savings increase, which can be invested or invested in other needs. “Early repayment of the loan also gives you peace of mind. It builds a strong foundation for your family,” says financial advisor Priya Sharma.

How to start?

Prepayment requires you to pay a little extra every month or deposit a lump sum amount in a year. Many banks offer online facilities where you can easily deposit the extra amount. But check your loan agreement first to ensure there are no hidden terms.

Final advice

While waiting for the new RBI policy, adopt a home loan prepayment strategy. This will not only save you money but also give you quick freedom from the debt burden. If your EMI is bothering you, consider this trick today. Are you also planning to prepay? Share your views with us.