Home Loan Relief: Should You Reduce Your EMI or Tenure After RBI’s Rate Cut? Here’s What Saves You More
- bySudha Saxena
- 12 Apr, 2025

The Reserve Bank of India (RBI) has delivered some relief to borrowers this year by slashing the repo rate by 50 basis points (bps) in two monetary policy meetings. This reduction brings down interest rates for both existing and new home loan customers. But if your loan gets cheaper, you’re left with a critical decision: Should you reduce your EMI or shorten your loan tenure?
Let’s break down what’s more beneficial in the long run.
🔻 What Does the Repo Rate Cut Mean?
RBI has reduced the repo rate by 25 bps in February and another 25 bps in April 2025, totaling a 50 bps reduction. As a result, banks will soon revise interest rates for floating-rate home loan borrowers during their reset cycles.
This means borrowers now have two choices:
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Lower their EMI (monthly outgo)
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Maintain EMI but reduce the loan tenure
🔍 EMI vs Tenure Reduction – What’s the Difference?
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Reducing EMI:
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Offers immediate monthly relief
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But total interest paid over time increases
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Reducing Loan Tenure:
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EMI remains the same
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But your loan ends earlier
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Massive savings on total interest
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📊 Example: See the Difference in Savings
Let’s consider this scenario:
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Loan amount: ₹40 lakh
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Interest rate: 8.5% (now down to 8% post cut)
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Tenure: 20 years
Option 1: Reduce EMI
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Old EMI: ₹34,713
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New EMI: ₹33,458
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Monthly savings: ₹1,255
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Total interest saved: ₹3.01 lakh
Option 2: Reduce Tenure (Keep EMI Same)
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Tenure drops to 18.33 years (20 months earlier)
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Interest savings: ₹6.93 lakh
➡️ Net Benefit of Reducing Tenure: ₹3.92 lakh more than EMI reduction
💡 Which Option Should You Choose?
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Choose EMI reduction if your monthly budget is tight or income is uncertain.
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Choose tenure reduction if you can afford the same EMI—it’s a smarter long-term move.
🧠 Expert Tip:
Always ask your lender to apply the interest rate change in a way that reduces your tenure, not just your EMI—unless cash flow is a concern.