This article lets you calculate the total interest savings on your home and other loans as well as to choose which option is better between EMI reduction vs loan tenure reduction.

📚 Table of Contents

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• Is an automatic reduction of home loan rate even possible?
• How Much Can You Save from a 0.25% Rate Cut?
• Should You Reduce Your EMI or Tenure?
• How much EMI reduces if the home loan interest rate reduces?

Is an automatic reduction of home loan rate even possible?

Yes, if your loan is linked to the repo rate and managed by a PSU bank that calculates interest on a daily reducing balance. The rate cut happens automatically - no need to contact the bank.

Image copyright Reddit. Source: https://www.reddit.com/r/personalfinanceindia/comments/1iptqno/

Reports from Reddit (see image above) confirm that PSU banks like SBI, Indian Bank, and Union Bank have automatically reduced home loan rates by 0.25%.

Meanwhile, private banks like HDFC, ICICI, and Axis have yet to implement the home loan rate cut, citing various reasons, as discussed in the Reddit thread. In some cases, borrowers have to wait until the next reset date which might be around a month away.

The rate reduction has also been applied automatically to car and educational loans as well.

This result was expected since SBI, for example, has already announced a 0.25% reduction for External Benchmark (EBLR) and Repo Linked (RLLR) rates inline with RBI’s 0.25% cut in the repo rate.

What is the latest repo rate?

The latest repo rate is 6.25%. This rate was last reviewed by RBI on 07 Feb 2025.

Related:
What is the latest RBI repo rate? What is the latest RBI reverse repo rate?

This is a marked departure from the earlier process where borrowers had to approach the bank requesting a loan rate reduction and even pay a fee like ₹5000+18% GST to get the rate cut. No fee has been charged this time: How paying a small fee to your bank can save you lakhs in home-loan interest?

The default option, at least for SBI, that is applied to the rate reduction is keeping the EMI same and reducing the loan tenure. This move automatically reduces the total interest payable since the EMI runs for a smaller number of months.

If you have not seen a reduction on your home, education or car loan yet, please contact your relationship manager or the lender’s customer service.

How Much Can You Save from a 0.25% Rate Cut?

Some borrowers worry that reducing tenure might not be the best option. However, unless you need immediate cash flow relief, reducing tenure leads to significantly lower total interest paid over time.

📌 Example: A 0.25% rate cut on a ₹1 crore loan over 15 years saves ₹2.6 lakh more in total interest if tenure is reduced instead of EMI.

The easiest solution for knowing the interest savings from your loan rate is to use the loan tracker functionality of the Arthgyaan goal-based investing tool. There is no charge for using this feature. All you have to do is enter the home loan details in the loan-calculation tab of the sheet.

We will use Google sheets to create a simple calculator for this calculation. There is a link to download a pre-filled copy of the Google sheet via the button below.

Important: You must be logged into your Google Account on a laptop/desktop (and not on a phone) to access the sheet.

Get the Sheet

Please refer to the loan-calculation tab of the sheet once you open it and enter just three numbers:

• Loan amount (outstanding in ₹ lakhs)
• Loan duration (left in years)
• Home Loan Rate (current rate in %)

Should You Reduce Your EMI or Tenure?

This is a question that depends on person to person. If you keep the EMI constant and reduce the tenure, the loan now runs for a shorter period and you pay even lesser interest of ₹524,213 as the calculator shows.

If you are hard-pressed for cash every month, only then you should opt for an EMI reduction which keeps the tenure the same, reduces the monthly EMI and still saves on the total interest by ₹264,764.

How much EMI reduces if the home loan interest rate reduces?

This table shows the monthly EMI reduction when your rate reduces for various combinations of outstanding amount and loan period left.

Please use the calculator linked above for knowing the savings for your own loan.