How to manage your rising home loan EMIs

Interest rates have skyrocketed over the past year. As a result EMIs across the board have become much more expensive.

Borrowers are facing significant increase in their EMIs or an extension of the loan tenures. Both of which can can create a bigger financial burden.

Anant Ladha, founder of investaajforkal says that while extending one's tenure is an option, its an option that can be avoided, if possible.

Its also important not to take any decision in a hurry. While he favoured the advice of paying the loan upfront, Ladha also maintained that in no case scenario should borrowers disturb their contingency fund or retirement fund. Instead, fixed deposits, Debt funds are all liquid investments that borrowers can readily divert towards pre-paying the loan.

Ladha also pointed out that we are towards the end of the interest rate hiking cycle and rates are expected to stabilise soon.

While banks can only increase the tenure to a certain extent, post that they end up extending the EMIs. So, extending the tenure in a way should be the last resort, explained Ladha.

As per Ladha, there are three basic rules that one should keep in mind

• Home loan EMI should not exceed 15% of monthly income.
• Total EMI should not exceed 40% of monthly income.
• New borrowers must opt for Flexi or Floating interest rate loans.