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Explained: With repo rate increased, how much more EMI will you pay

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Google Oneindia News

New Delhi, May 04: The Reserve Bank of India (RBI) has increased the repo rate by 40 basis points due to high inflation levels.

RBI raises repo rate to 4.40% in a surprise move; first since May 2020 | Inflation | Oneindia News

With the repo rate being hiked, the rate at which the banks borrow from the RBI for loans for its customers will become higher If your loan amount is Rs 30,00,000 and the tenure is 20 years, then it would increase from the existing 6.8 per cent to 7.2 per cent.

Explained: With repo rate increased, how much more EMI will you pay

The EMI for your 20 year loan of Rs 30,00,000 will increase from 22,900 to 23,620.

This means the EMIs would go up by Rs 720.

If you are planning on taking a loan then it should be done soon as the increase in loan rates would begin very soon.

If you are an existing borrower, then this hike will not impact you and you can continue paying the existing EMIs.

The reason why those looking for a loan should act quickly is because for fixed car and personal loans the EMI remains the same through the tenure. So the point of entry is crucial here. If the loan is taken at a time when the interest rate is low, then you can enjoy the rate till the end of the tenure even if the overall interest rates go up.

In the case of home loans the impact would be higher. Home loans are on a floating basis where any such hike is passed on to the borrower.

All floating rate home loans taken after October 1 2019 are linked to an external benchmark as per the mandate of the RBI. Since most banks have selected the repo rate as the external benchmark, a hike in repo rate will most likely mean an increase in the interest rate for loans.

Moreover banks are mandated to revise their external benchmark based lending interest rates once in three months to bring them in line with the external benchmark they are linked to.

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