Whenever the Reserve Bank increases the repo rate, the loan installments also become expensive. In such a situation, many times people choose the option of loan refinancing. Know here when refinancing is beneficial and for whom.
RBI has recently increased the repo rate for the sixth time. Whenever the repo rate is increased, the loan interest also increases because the repo rate is the rate at which the Reserve Bank gives interest to other banks. When banks get loans at expensive rates, then banks also give loans to their customers at expensive rates only. Due to this many times, there is a burden on the pocket of the common man and the budget of the person gets disturbed. In such a situation, the option of loan refinancing can be very helpful for you. Know here what is refinancing.
What is loan refinancing?
In-home loan refinancing, a new loan with terms like a lower interest rate is taken and the old loan is closed. After this, the repayment of the new loan is started. You can take a new loan from the existing or new bank.
How to get the benefit of loan refinancing
You take a new loan with lower interest rates, so your EMI burden automatically reduces. Apart from this, if you want, you can also take advantage of a shorter loan tenure in the new loan. That is while taking a new loan, you can reduce the loan repayment period. With this, you can prepay your home loan.
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When should loan refinancing be done?
If you opt for refinancing before the first half of the financing of the loan is over, then it can be beneficial for you. The reason for this is that at that time the share of interest in EMI remains high. In such a situation, a new loan with low interest is quite a relief for you.
Loan refinancing is beneficial only if you are not able to pay the current high-interest rates and the new loan is offered to you with a lower interest rate.
If you feel that you have not found a good lender and you are not getting better facilities from him, then you can get the loan refinanced.
If you have taken a loan at a fixed rate of interest, but after some time the rate of interest has started decreasing. If you want to adopt new interest rates, but your bank is not ready to give you the option of a floating rate loan in this situation, then you can get the loan refinanced.
If your financial condition is better than before and you want to reduce the loan tenure, then you can settle the new loan in less time by getting the loan refinanced.
