The Reserve Bank of India (RBI) is going to announce the monetary policy on Wednesday. It is expected that the Reserve Bank of India can cut the repo rate by up to 0.25 percent. This will also reduce the interest on your home loan and the EMI will also decrease in the coming months. In such a situation, it is beneficial to understand this trick related to home loans. Paying the home loan EMI before time can save you a lot of money.

The interest burden will be reduced.

Paying the home loan EMI before time is always considered a smart move. It reduces the interest on your home loan as well as the burden of EMI. Pre-payment of a home loan reduces your principal amount, which also reduces your loan tenure.

CIBIL score will improve

Pre-payment of home loans not only reduces the burden of your EMI and interest. But it also improves your CIBIL score. CIBIL score is a measure of your ability to take a loan. This determines your creditworthiness and on this basis, the banks decide to give you a loan. A CIBIL score above 750 points is always considered good.

How much is the home loan interest

Till April 2025, the home loan interest rates of the country's major banks SBI, Kotak Bank, HDFC Bank, ICICI Bank, and other banks are between 8.25 percent to 10.25 percent. Now these may change after the RBI changes the repo rate tomorrow.

According to Mint's news, Rishi Anand, MD and CEO of Aadhar Housing Finance Limited, says that pre-payment of a home loan can be a financially good decision. If your home loan is on a floating interest rate, then there is no pre-payment penalty in such a home loan.

The floating rate is the interest rate which keeps changing with time. Generally, the floating rate is connected to the repo rate of the Reserve Bank of India. In such a situation, if the repo rate increases, then the interest rate of the home loan also increases and when the repo rate decreases, the interest rate of your loan also comes down.

By the way, loan pre-payment does not only mean reducing the interest rate. It also strengthens your financial future.

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