If you are repaying a home loan or thinking of taking a new loan, then this is good news for you. The Reserve Bank of India (RBI) has taken a big decision in the June monetary policy meeting and reduced the repo rate by 0.50% to 5.50% . This change will reduce the cost of lending to banks, and customers will get direct benefit from this.
What will be the impact on EMI?
After this decision of RBI, if banks also reduce the interest rate by 0.50%, then there can be a significant relief in the EMI of home loan. Let us understand this with an example:
- Loan amount: ₹30 lakh
- Loan tenure: 20 years
- Old interest rate: 8.75%
- New possible interest rate: 8.25%
How much will be the monthly benefit?
interest rate EMI (₹) Total Interest (₹) Total Payment (₹)
8.75% ₹26,511 ₹33,62,717 ₹63,62,717
8.25% ₹25,562 ₹31,34,873 ₹61,34,873
Monthly EMI savings: ₹949
Total savings in 20 years: ₹2,27,844
Reduce EMI or settle loan early?
Banks usually offer two options after the interest rate reduction:Reduce EMI: There will be less burden on your pocket every month