RBI repo rate hike: Here is how much extra interest you will pay on home, personal and car loan EMIs
With the continuous attempt of policy tightening, the overall interest rates, or the tenor on which the consumers have taken loans are scheduled to rise.
RBI MPC Meeting: Home, auto, and personal loan EMIs are likely to rise going forward after the Reserve Bank of India’s (RBI) monetary policy committee (MPC) raised benchmark interest rates by 35 basis points taking the total repo rate to 6.25 per cent. The repo rate was earlier raised to 5.9 per cent in order to tackle soaring inflation.
With the continuous attempt of policy tightening, the overall interest rates, or the tenor on which the consumers have taken loans are scheduled to rise as Banks and Non-Bank Finance Companies (NBFCs) shall raise the interest rates to accommodate the hike announced by RBI.
In such a situation, it is important to understand by much percent or in rupees terms, EMIs (Easy Monthly Instalments) will rise per lakh rupees. Here is the calculation of the increase in EMI of home loans, personal loans, and auto loans.
Home loan EMI
To put in perspective, if a home loan of Rs 1 lakh is availed at the rate of 8.40 percent, then according to the HDFC home loan calculator, the monthly installment or EMI per Rs 1 lakh for 20 years will come to around Rs 862 per lakh.
Now, if the same rate increases by 35 basis points (0.35) per cent, then the overall interest rates on which bank charge shall increase to 8.75 per cent from 8.4 earlier, because of this rise the EMI of customers may come to around 884 per lakh as per the calculator.
This means, a customer, who has taken Rs 1 lakh loan, ends up paying Rs 22 more on home loan EMIs every month after the new rate hike announced by RBI MPC is accommodated by banks and NBFCs.
EMI on Personal Loan
Similarly, if a customer has taken a personal loan of Rs 1 lakh for 5 years from a bank, NBFC, or any other financial institution at an interest rate of 10.65 percent, then the EMI which was earlier Rs 2,157 per lakh will now come to Rs 2174 per lakh, according to the PNB loan calculator.
This means, a customer, will have to pay Rs 17 more every month on a personal loan post the 35 bps hike announced by RBI MPC policy today is accommodated by the banks and NBFCs.
EMI on Car Loan
To put in perspective, If a customer has taken a car loan of Rs 1 lakh, the EMI on the same as per the SBI loan calculator would come to around Rs 2047 at the rate of 8.40 percent for 5 years. However, this EMI per lakh will now come to Rs 2064 per Rs 1 lakh post the announcement of the RBI rate hike today.
Increase in Loan EMIs: Expert’s View
"As interest rates rise, the impact of monthly installments for both new and existing customers will be felt. For instance, if the rate of interest is hiked by 0.35, then the EMI of a loan of Rs 10 lakh taken at 8.5% for ten years will increase by around Rs 300,” Atul Monga, Chief Executive and Founder of Basic Home Loan said in his view.
He added that to deal with the impact of a higher interest rate, it is important to maintain good credit, research the best rate offers, and consider refinancing existing loans to lower the monthly payments. Customers can also opt for long tenures or switch to a floating rate of interest to lower their EMIs.
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