Key Points
Typically, when interest rates rise, banks extend the. to prevent borrowers from facing higher monthly payments..
Recognising this challenge, the RBI issued a notification on August 18, 2023, mandating lenders to provide borrowers with options to adjust their EMIs or extend the loan tenure, or both, at the time of resetting interest rates on home loans...
Lenders must inform borrowers about how changes in benchmark rates could affect EMIs, tenure, or both.Borrowers should have the option to switch from a floating to a fixed interest rate during interest resets, with all associated charges disclosed.Borrowers should be able to choose between extending the loan tenure, increasing EMIs, or both.Lenders must ensure that extending the tenure doesn't lead to negative amortisation, where monthly payments are insufficient to cover accruing interest...
According to the new RBI mandate, banks must offer you the option to either increase your EMI, extend the loan tenure, or use a combination of both when resetting the interest rate...
When faced with the decision of whether to increase the EMI or extend the loan duration due to a rise in interest rates, home loan borrowers should consider their financial situation carefully...
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