Now the loans will become cheaper as the RBI has decreased the Repo Rate. Various Loans such as Home Loan will become cheaper and the interest rate will decrease. But how will this happen? Let’s understand.
The Repo Rate is the rate at which the RBI gives money to Banks. Now, RBI will give money to Banks at low interest rates so now, Banks will also give loans to customers at low interest rates. The rate of interest of Banks is linked to the Repo Rate.
For example: The minimum rate of interest of Home Loan in PNB is 8.4%. This 8.4% is calculated as RLLR+BSP-0.85% = 8.40%. This is how banks impose rate of interest on loans. This RLLR is Repo Linked Lending Rate and is dependent on Repo Rate. Now if Repo Rate is decreased, then this interest rate will also decrease. The repo rate is decreased by 0.25%, so the interest rate will also decrease by 0.25%. This means that the minimum rate of interest of Home Loan in PNB may decrease to 8.15%.
This is the first rate cut in two years, following a series of hikes that saw the repo rate rise from 4% in May 2022 to 6.50% in February 2023. The rate cut comes as a relief to borrowers, especially first-time homebuyers, and is expected to boost the real estate sector.
How much money can be saved?
Suppose, you take a home loan of Rs.50 lacs for 30 years at 8.4% interest rate then you need to pay an EMI of Rs.38091.88 and interest of Rs.8713076.8 on the loan. Now if we decrease the interest rate to 8.2%, then you need to pay and EMI of Rs.37387.72 and interest of Rs.8459579.2. There is a total difference of Rs.253497.6 in interest that needs to be paid. This means you can save Rs.2,53,497.6 if rate of interest gets decreased. Click here to calculate Loan EMI.
How to apply for Loans?
You can easily apply for any loan by visiting the branch of your bank. You just need to visit the branch and meet the loan officer and complete the formalities. Apart from this, you can also apply for loan online via the mobile app or website of your bank.
