Remaining loan tenure has no impact on principal outstanding

By Chaitali Dutta

My bank did not reduce my home loan EMI following interest rate cut. On enquiry, it said the loan tenure will reduce, but when I went to settle the home loan it mentioned the same amount without reducing tenure. What should I do?
—Pradeepkumar P
Usually, banks will want a separate request from you for a reduction/ increase in EMI when a floating interest rate is reduced/increased. The default is a reduction in tenure. In your case too, the tenure was reduced as you continued paying the same EMI. Now let us look at the prepayment situation. At any point in time during the tenure of your loan, outstand-ing is the principal amount on the day you have paid the EMI. If you desire to close the loan, the outstanding needs to be paid in full. It does not matter what the remaining tenure is—20 months or 200 months—the repayment of outstanding will have to be made in full.

I had taken an education loan in Btech first year in 2014 of Rs 6.5 lakh and started EMI after one year of my job in 2019. What additional benefits can I get to reduce my loan amount? Can I ask the bank to restructure my loan as I am the only earning person in my family?
—Dinesh Patel
The Covid-19 induced financial situation is not a normal occurrence. In any other year, you would have no other recourse than to pay the contracted EMI for the education loan taken. However, since we are going through economic distress at all levels—personal as well as economic—I suggest you appeal to the bank for loan restructuring. You need to explain the financial difficulties you are going through, attaching proofs of the same. However, please bear in mind that the application is no guarantee that the benefit will be provided to you.

My wife’s Senior Citizen Savings Scheme account matured this month and was extended for three more years. Originally it was carrying 9.3% interest and now it is only 7.4%.From which financial year was this new provision implemented?
—S Viswanathan
The interest rate on SCSS is fixed for five years. Five years back it was 9.3%. The existing rate of 7.4% is with effect from April 2020. You would have noticed that bank interest on FDs too has been steadily declining.

The writer is founder, AZUKE Personal Finance Advisory (www.azukefinance. com). Send your queries to fepersonalfinance@expressindia.com