08 August 2011
Why my EMIs have increased?
Due the Reserve bank of India increasing its prime lending rate all the other lending banks and institutions have increased their interest rates to keep up with this. They cannot bear the financial losses and even if they have offered loan to customers they have to take the opportunity of policy change and use this to change the interest rates on loans of the existing customers.
EMIs are fixed or decided at the time of borrowing of home loan or any other loan. It is a fact that during the repayment tenure the most amounts to be repaid during early years is a high interest amount, whereas, as the years go by the interest rate, much of which is paid, reduces and the principal amount increases in your monthly EMIs. Even HDFC has increased their prime lending rate and this has had an immediate effect on home loan borrowers. Since the Housing Development Finance Corporation like the Reserve bank offers finance to many lending banks and institutions all of them have had to increase their inertest rate with which they offer loans to borrowers.
Many banks do increase the loan tenure of repayment but this also will not be able to cover the high interest rates in the whole loan repayment tenure. And also there is a limit to increasing the loan tenure. Hence many banks nowadays have no other option but to increase the interest rates for all home loan borrowers, no matter from which lending institution they have borrowed their home loan.
As a result of these bank policy changes the customer has to bear the burden of increased EMIs. This suddenly makes a financial crunch as the home loan borrower has to keep up with this always till the whole loan repayment period. The lenders also have no option since the home rates are so high; they also have to recover their loan amount within a certain time period.
So be prepared all you home loan borrowers for an increased EMI and the new home loan borrowers, be grounded! Take only that which you can chew!