For a common man, a home loan EMI is the most sacrosanct thing to honour every month. First thing that one does after salary is credited in the bank account is to keep aside the EMI amount so that it can be deducted by the lender. An EMI is one of the major fixed expense to incur every month. We list below the three most important factors that affect your EMI along with tips on how you can effectively manage the EMI amount:

1) Interest rate –

If you have taken a floating loan, your EMI gets affected with any change in the interest rates of the loan. If the interest rate goes up, it has a direct effect on your EMI amount as the lender will raise the EMI amount accordingly. It is always prudent to be updated on any changes in the RBIs repo rate as it has a direct impact on your loan. For example, if RBI reduces the repo rate, your lender is likely to pass it on to you. You should always check whether the same has been passed on to you with the lender.

2) Tenure –

Your EMI will be higher with a shorter tenure and vice-a-versa. One must evaluate his current income and fixed expenses before choosing the tenure of the loan. For example, if your current income is not high and you feel that paying EMI would be a monthly struggle after meeting all other expenses, then you should opt for a longer tenure that will lessen the EMI amount.

3) Part-prepayment of principal –

As your earnings increase, it is advisable to start making partial pre-payments towards the principal amount of your loan. When you wish to make a pre-payment, the lender always gives you a choice on whether you want an effect on the tenure of the loan or the EMI amount. So, if you are financially stable enough, you must opt for an effect on the tenure so that the number of the months that you need to repay the loan reduce. However, if you believe that the EMI amount is higher, and you need to bring it down, you can opt for an effect on EMI so that the amount reduces.