How To Manage Rising Home Loan EMIs

While managing rising EMIs can be challenging, the right strategy can help individuals can ease their financial burden, says rediffGURU and financial planning expert, Colonel Sanjeev Govila (retd).
Ask Colonel Govila your home loan and personal finance-related questions HERE.

Buying your own home can be an expensive proposition in India.

And if you have taken a home loan, you could find yourself cutting a few corners so that you can pay the monthly EMI.

With the home loans rates rising, your EMI would have gone up as well.

Here are seven practical tips that will help you manage this extra financial requirement:

1. Review and adjust your budget

Take a comprehensive look at your monthly budget.

Identify areas where you can cut back temporarily to accommodate the increased EMIs.

By reallocating funds, you can maintain financial stability without compromising too much on your lifestyle.

2. Refinance or renegotiate

If your loan allows for it, consider refinancing your home loan at a lower interest rate. This can significantly reduce your monthly EMIs.

Alternatively, reach out to your lender to negotiate the terms of your loan, such as extending the loan tenure, which can spread out the impact of rising rates over a longer period.

3. Prioritise high-interest debt

If you have other high-interest payments, such as credit card debt or personal loans, prioritise paying them off.

This will free up more of your monthly income to cover the increased home loan EMIs.

High-interest debt can be a bigger financial drain than a home loan.

4. Cut down discretionary spending

Temporarily reduce non-essential expenses like entertainment, dining out, subscription services and luxury purchases.

Redirect the funds you save toward covering the higher EMIs.

This sacrifice might be temporary until the rates stabilise.

5. Utilise windfalls

If you receive any unexpected windfalls, such as a bonus, tax refund or monetary gifts, consider putting a portion of these funds towards your increased EMI payments.

This can help you stay on track with your payments while minimising the impact on your regular budget.

At the same time, you can also prepare for future interest rate hikes:

1. Create an emergency fund

Building an emergency fund is crucial when it comes to handling unexpected expenses without resorting to high-interest loans or credit cards.

Set aside a portion of your income each month to gradually build this fund. It will provide you with a safety net in times of need.

2. Boost your income

Explore opportunities to increase your income, such as taking up freelance work, consulting or a part-time job.

This extra income can help you pay a rising EMI, while allowing you to maintain your current lifestyle.

Remember, the key is to strike a balance between meeting your financial obligations and maintaining your quality of life.

It might take some adjustments and sacrifices in the short term but, with careful planning and discipline, you can navigate through the period of rising EMIs without jeopardising your overall financial well-being.

You could also approach a certified financial advisor who can offer personalised guidance tailored to your specific situation.

Colonel Sanjeev Govila (retd) is certified financial planner, Sebi registered financial advisor and the founder of humfauji.in (external link).

You can ask him your home loan and financial planning-related questions HERE.