The Reserve Bank reduced the repo rate by 25 basis points on Friday, bringing it down from 6.50% to 6.25%. This cut will make loans cheaper and reduce EMI burdens for borrowers. The decision was taken after the Monetary Policy Committee (MPC) meeting, marking the first rate cut in about five years.
With lower interest rates, EMIs for personal, home, and vehicle loans will decrease, providing some relief from inflation. Additionally, people looking to take new loans will benefit from lower interest rates, which may lead to an increase in loan applications.
Savings on Personal Loan
Suppose you have taken a personal loan of Rs 5 lakh at an annual interest rate of 12% for 5 years. With the 0.25% reduction in the repo rate, the interest rate decreases to 11.75%. Here’s the impact:
- Old EMI (at 12%): Rs 11,122
- New EMI (at 11.75%): Rs 11,059
- Annual Savings: Rs 756
#RBIPolicy | #RBI hikes repo rate by 25 bps to 6.50%#MPC #RepoRate pic.twitter.com/48GeHgNqTn
— CNBC-TV18 (@CNBCTV18Live) February 8, 2023
Savings on Car Loan
If you bought a car worth Rs 10 lakh at a 9% annual interest rate for 7 years, here’s how the reduction in interest will affect your EMI:
- Old EMI (at 9%): Rs 16,089
- New EMI (at 8.75%): Rs 15,962
- Annual Savings: Rs 1,524
Home Loan Tip: When Interest Rates Drop, Do This!
RBI just cut interest rates by 0.25%—good news for home loan borrowers! But should you reduce your EMI or shorten your loan tenure? Let’s simplify it.
🔹 Suppose you have a ₹1 crore loan at 8.5% interest for 25 years
👉 Your… pic.twitter.com/QpL7FxYuSK
— Sanjay Kathuria, CFA (@sanjaykathuria) February 21, 2025
Savings on Home Loan
For a home loan of Rs 50 lakh taken for 25 years at an interest rate of 9%, the reduction in the repo rate will bring the rate down to 8.75%. Here’s the impact on your EMI:
- Old EMI (at 9%): Rs 41,960
- New EMI (at 8.75%): Rs 41,107
- Annual Savings: Rs 10,236