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If you’ve taken a home loan in India over the last few years, you’ve probably noticed your EMI statements creeping upward. That’s because interest rates have been rising steadily, and for borrowers, that means your cost of borrowing goes up too. While the repo rate hikes by the RBI are aimed at tackling inflation, they flow directly into how much you pay each month.

Why your EMI changes with rates

Most home loans in India are linked to floating rates, which move up or down depending on the RBI’s repo rate. When rates rise, your lender has two options—either increase your EMI or extend your loan tenure. Often, banks prefer to extend the tenure so the EMI doesn’t suddenly become unmanageable. But that also means you may end up paying interest for many more years.

The hidden long-term cost

Even a small percentage hike in interest rates can have a big impact over a 20- or 25-year loan. For example, if your EMI stays the same but your tenure is extended by three to five years, that’s extra interest adding up quietly in the background. On the other hand, if your lender raises your EMI instead of extending tenure, you’ll feel the pinch on your monthly budget right away.

What you can do about it

If your EMI feels heavy, talk to your lender about part pre-payments. Even small lumpsums made during the early years of your loan can bring down the overall interest burden. You can also explore switching to another bank with lower rates through a home loan balance transfer, though you should weigh the costs and processing fees carefully.

Should you go fixed or floating?

Some borrowers consider switching to a fixed-rate loan when interest rates are climbing. While this may give you peace of mind for a few years, fixed rates are usually higher than floating ones. If rates stabilize or fall later, you might end up paying more. For most borrowers, floating rates remain the more cost-effective choice over the long term.

The takeaway

Rising interest rates are a reality that home loan borrowers can’t ignore. The key is to understand how your EMI and tenure are being adjusted and to take proactive steps—like pre-payments or transfers—before the additional costs pile up.