New Delhi, 8 February (IANS). The repo rate has been reduced by 0.25 percent to 6.25 percent by the Reserve Bank of India (RBI). This is the first time in the last five years when interest rates have been reduced by the central bank. Due to this, people taking loans (especially home loans) will be able to save big.
All floating retail loans issued since October 1, 2019 are linked to the external benchmark. In such a situation, whenever the repo rate is reduced by the central bank, banks have to compulsorily transfer this benefit to their customers. For this, banks reset interest rates every quarter.
If your home loan is taken before October 1, 2019 and is linked to the Marginal Cost of Funds based Lending Rate (MCLR), then it would be a good option to refin the home loan to take advantage of the reduced repo rate. You can take advantage of the reduced repo rate from this.
Whenever the repo rate is reduced, the interest rate on all types of loans linked to it decreases. With this, people have to pay less interest on loans than before.
At the time of reducing the repo rate, most banks do not reduce your EMI, but give the benefit of the reduced interest rate by reducing the duration of their loan.
For example, if a borrower has charged a home loan of Rs 75 lakh from the bank for 20 years, but 36 months after taking the loan, the interest rate is 8.75 percent.
Due to the low interest rate, the borrower will now have to pay interest of Rs 1.57 crore instead of Rs 1.62 crore on the loan within the stipulated period. This will save about 5 lakh rupees and the loan will end seven months in advance.
-IANS
ABS/
