Save money3 min read · Updated 17 October 2026
How to reduce your home loan interest: 7 ways that work
Seven practical ways to pay less interest on your home loan in India: lower spread, EBLR, transfer, prepay, an extra EMI and more, with real numbers.
1. Ask your lender for a lower spread
Your floating rate is the benchmark (usually the repo rate) plus a spread the lender set on day one. The benchmark moves with RBI. The spread stays the same unless you ask. Lenders often charge new customers a lower spread than old ones, so write to your lender with the rate it shows on its website for new borrowers and ask it to match. Even 0.25% is worth about ₹1,89,091 on a ₹50,00,000, 20-year loan.
2. Switch from MCLR to the repo-linked rate
If your loan was sanctioned before October 2019 or is still linked to the old MCLR or base rate, you may be on slower, higher-priced pricing. Banks allow a move to the repo-linked (EBLR) rate for a small admin fee. Compare the rate before and after. See EBLR vs MCLR.
3. Transfer to a cheaper lender
If your lender will not move, another one may. A gap of about 0.5% or more on a loan with many years left usually pays. Work out the net saving after all costs with the Switch or stay? tool, and read the balance transfer check.
4. Part-prepay whenever you have spare cash
Every rupee prepaid stops earning interest for the lender from that day. Floating-rate home loans to individuals carry no pre-payment penalty, so the only cost is the cash you tie up. Ask the lender to keep your EMI the same so the tenure shrinks, which saves the most. See reduce EMI or tenure?.
5. Pay one extra EMI a year
Add one twelfth of your EMI to each payment, or pay one extra EMI at bonus time. On ₹50,00,000 at 8.5% for 20 years, that is about ₹3,616 more a month. The loan ends about 3 years 6 months early and saves roughly ₹10,89,406 in interest. Our Pay off sooner tool lets you test other amounts and a yearly step-up.
6. Improve your credit score before you ask
Lenders price risk, and a higher credit score gets a smaller risk premium. Pay every EMI and card bill on time, keep card use well below the limit, avoid many loan enquiries close together, and fix mistakes on your credit report. Then ask for a better rate. See what score gets the best rate.
7. Park spare cash in an overdraft-linked home loan
Some lenders offer a home loan linked to a savings account (for example SBI Maxgain). Interest is charged only on the balance after the money you keep in the account is subtracted. It works if you hold large idle cash. The rate can be slightly higher, so compare the total cost.
What does not help
- A longer tenure to cut the EMI. It lowers the monthly payment but raises total interest.
- A top-up loan to invest. Top-ups usually cost more than the home loan itself.
- Paying a broker or "consultant" to get a lower rate. You can ask the lender yourself.
Common questions
What is the fastest way to reduce home loan interest?
Ask your lender for a lower spread or rate match, in writing. It costs nothing. After that, part-prepay with spare cash and ask the lender to keep your EMI unchanged so the tenure shortens.
Does prepaying a home loan save interest?
Yes. Interest is charged on the outstanding balance, so a lump sum cuts the balance and all the interest that would have grown on it. For floating-rate home loans to individuals there is no pre-payment penalty.
Is a lower EMI or a shorter tenure better?
A shorter tenure saves more interest. A lower EMI helps your monthly budget. If you can afford it, keep the EMI and let the tenure fall.