After the budget 2023 presented by the Government of India, there has been a big relief news for the general public. The Reserve Bank of India (RBI) has recently changed the repo rate, which is likely to decrease in EMI on bank loans such as home loans, car loans and personal loans. This step has been taken with the aim of improving the economic situation of the country and providing relief to the general public.
The repo rate is the rate on which RBI gives loans to banks. If this rate is low, banks get cheaper debt, and they deliver it to customers at low interest rates. In this article, we will know in detail how this change will affect your EMI and it will directly affect your pocket.
The effect of change in repo rate
RBI has kept the repo rate stable or made a slight cut in its latest announcement. This will directly affect those who are taking home loan, car loan or any other bank loan.
Repo rate and EMI relation
- If the repo rate decreases, it becomes cheaper to take loans for banks.
- This reduces interest rates on loans given by banks to customers.
- As a result, your monthly EMI also decreases.
How much will EMI decrease?
Suppose you have taken a home loan of Rs 20 lakh, whose interest rate was 8%. If the repo rate cuts by 0.25%, your EMI can be reduced to about 500-1000 rupees.
New EMI impact on bank loan: a look
In the table below, we have tried to explain what effect can be on your EMI due to decrease in repo rate:
| Loan type | Old interest rate (%) | New interest rate (%) | Old EMI (Rupees) | New EMI (Rupees) |
| Home loan (20 lakh/20 years) | 8% | 7.75% | 16,729 | 16,321 |
| Car Loan (1 million/7 years) | 9% | 8.75% | 15,580 | 15,350 |
| Personal Loan (5 Lakhs/5 years) | 12% | 11.75% | 11,122 | 10,982 |
From this table, you can see how a slight reduction in repo rate can also give your monthly EMI.
Impact on Home Loan
This news is no less than a boon for those taking home loans. If you are planning to buy a new house or are paying the EMI of home loan already taken, then you will directly benefit.
Benefits:
- Reduction in interest rates will reduce monthly installments.
- Total interest payment on long -lasting home loans will also decrease.
- This can prove to be the right time for those who buy new homes.
Relief for those taking car loan
If you are thinking of buying a new car then this time can be favorable for you. Reduction in interest rates on car loans will reduce your monthly installments and total expenses will also decrease.
Benefits:
- It will be easy to buy a new car.
- Older car can refine the loan.
Personal Loan and other loans
Personal loans are often found at high interest rates. But after the repo rate cut, their interest rates will also decrease.
Benefits:
- There will be cheap debt for marriage, education or other personal expenses.
- The current personal loan repayment will be easy.
Should you take a new loan?
If you are planning to take a new home loan, car loan, or personal loan, this may be the right time. However, you must assess your financial status and needs.
Noted things:
- Compare interest rates.
- Understand pre-payment options.
- Select short period instead of long periods.
Budget and repo rate: Government’s objective
The main objective of the government and RBI is to strengthen the economic situation of the country and provide relief to the general public. Repo rate cuts:
- Cash flow increases in the market.
- People are motivated to spend more.
- Economic development gains momentum.
Can existing customers also benefit?
Yes, if you have already taken a bank loan, then you can also take advantage of this change. For this:
- Contact your bank and discuss new interest rates.
- Choose to refine your existing loan.
- Select the floating rate option so that you can also benefit in future.
conclusion
Change in repo rate has brought a big relief for the general public. Especially for those who are planning to buy a house or take a new car, this can prove to be the right time. However, it is very important to assess your financial situation before taking any kind of loan.
Disclaimer:
This article is written only for the purpose of providing information. Please seek specialist advice before taking any financial decision. The repo rate and its effects declared by RBI may vary depending on the actual conditions.
