Steps Senior Citizens Should Take To Get The Benefit Of The Interest Rate Cut On Their Loans

“Penny saved is a penny earned”, and seniors know this better than anyone else. Having a loan during retirement can be a significant financial burden. Despite retirement planning, there may be some loans that cannot be closed before retirement, such as a home loan, car loan, or a personal loan taken in a financial emergency. A fall in the rate of interest on the loan can ease the repayment burden for senior borrowers, provided they know how to do it. So, here are some important things that senior citizen borrowers can do to get the maximum benefit of the interest rate cut on loans.

Check The Interest Levied By The Lender And Compare It With The Market Rate

Though the interest rate cut has been announced by the reserve Bank of India (RBI) but the interest on your loan product may not get the immediate benefit because the rate transmission is a big issue in the Indian banking system. So, you should compare the interest rate levied on the loan by your bank with the other lending institutions in the market, and if there is a significant difference, then you may plan to transfer the loan to another bank. Before transferring the loan, you may check with your existing lender about their rate revision frequency and how much cut is expected in it. If the rate cut is due in a few days, you may wait for the rate cut to happen and then decide about the loan transfer.

Before transferring a loan, you should also check things like your outstanding loan amount, foreclosure charges in your existing loan product, processing fee charged by the other lender, etc.

Prioritise Prepayment Of Loans That Have The Highest Rate Of Interest

With a fall in the interest rate, the loan equated monthly installment (EMI) comes down, so it’s a big opportunity for senior borrowers to repay their loans quickly. Prepayment can save interest and provide a financial cushion for seniors in their retirement period. It is important to choose such loans for prepayment that have the highest rate of interest. Prioritising the loan prepayment based on their interest rate can help in closing high-interest loans earlier.

Consolidate Multiple Loans To Lower The Rate And Make Repayment Easier

If you have multiple loans, you can consolidate them into one or two bigger loans to get the benefit of a reduced interest rate. For example, if you have personal or credit card loans along with a home loan, you can apply for a top-up on your existing home loan and use its proceeds to repay your unsecured loans. It’ll lower the interest outgo and also reduce the number of EMI for you.

So, if you have a loan to repay in your retirement period, make sure that you get the full benefit of the reduced interest rate.

The author is an Independent Financial Journalist