New RBI Rules: How to Cut Your Home Loan Interest Faster

If you have a floating home loan, the Reserve Bank of India (RBI) has brought in new rules that can help you reduce your interest cost sooner. These changes, effective from 1 October 2025, are designed to give home loan borrowers more benefit when their credit profile improves.

1. Faster change in your home loan interest rate

What was the earlier rule?

Earlier, banks could reduce the spread on your home loan only once in three years. The spread is the extra amount added over the benchmark rate to decide your final interest rate.

What is the new rule?

Now, banks can cut the spread earlier if your credit score or financial profile becomes better. This means you do not have to wait for three full years to get the benefit of a stronger profile.

What this means for you

A lower spread means a lower interest rate on your home loan. This can:

• Reduce your monthly EMI, or
• Keep your EMI same and reduce your loan tenure, or
• Do a mix of both, depending on what you choose with your bank.

What you can do now

• If your credit score has gone up, or your other loans and debts have reduced, contact your bank and ask for a fresh review of your home loan rate.
• Clearly ask the bank to recheck the spread based on your latest credit score and income details.
• Compare the new offer with your current EMI to see how much you can save.

2. Faster updates in your credit score

What has changed?

Credit Information Companies will now update your credit score five times a month instead of less frequent updates.

Why this is good for you

Any good step you take will now show up faster in your credit score, such as:

• Clearing outstanding dues or overdues.
• Reducing your credit card balance.
• Closing high-cost personal loans.
• Fixing wrong or old negative entries in your report.

As your credit score improves quickly, you get a stronger case to ask your bank for a lower home loan interest rate.

What you can do now

• Check your credit report regularly from trusted platforms.
• Dispute any errors in your report and get them corrected.
• After clearing dues or improving your usage, wait for the next update cycle and then check your new score.
• Once you see a clear rise in your score, request your bank to reassess your home loan rate.

Your simple action plan

Step 1: Monitor your credit score

Make a habit of tracking your credit score at least once a month. This helps you see the impact of your payments and credit use.

Step 2: Ask your bank to review your rate

When your credit score improves or your debt level goes down, write or visit your bank and ask them to:

• Review your home loan account.
• Reduce the spread based on your new profile.
• Share a revised rate and EMI calculation.

Step 3: Choose lower EMI or shorter tenure

Once the bank offers a lower rate, you can decide:

• Lower EMI: Your monthly outgo becomes lighter, which can help your monthly budget.
• Shorter tenure: You keep the EMI similar but reduce the total number of years, which cuts your total interest cost.
• You can also ask the bank if a mix of slightly lower EMI and slightly shorter tenure is possible.

Why these RBI rules matter for you

The new RBI rules make floating home loans more flexible and more friendly for borrowers. They reward people who manage their money well and keep a good credit record.

By improving your credit score, paying on time, and staying active with your bank, you can enjoy a lower interest rate much earlier than before. Over the full life of a home loan, even a small cut in interest rate can save you a large amount of money in ₹.

Bottom line

The message is simple: take care of your credit score, keep an eye on your report, and do not wait for the bank to move on its own. Use the new RBI rules to your benefit by asking for a review at the right time.

A little effort now can help you enjoy lower home loan interest and reach a debt-free home much faster.

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