New Delhi: The Reserve Bank of India (RBI), in its monetary policy review on Friday increased the repo rate by another 50 basis points, taking it to 5.9%. This is the fourth consecutive hike in repo rate since May. The move has been effected by the RBI to contain the steep rise in inflation but it is bound to have cascading effect on your finances, the impact of which will be seen in days to come.
Overall, the RBI has increased repo rate by almost 190 bps in current financial year. In August this year also, the Central Bank had raised repo rate by 50 bps.
Effecting another 50 bps hike in repo rate today, the RBI government said that the Central Bank will prioritize more on containing inflation rather than promoting growth.
While the impact of RBI rate hike on inflationary pressures is yet to be seen, here is how the escalation will impact your finances & the EMIs…
EMIs to go up, home loans to become costlier
With fresh hike in prime lending rate/repo rate, the Easy Monthly Installments (EMIs) on your home loans, car loans & other loans are set to get more expensive. You will have to shell more money on your EMIs for the same amount of loan.
As loans form an essential part of home loans & car loans, the house & car owners will bear the pain of this hike.
Examples
– If you have taken a house loan of Rs 50 lakh at 10% interest rate for 15 years, the EMI till now stood around Rs 53,730 while the fresh spike will push this amount to Rs. 55,270 for the same period.
– If you have taken a loan of Rs 50 lakh at 8.5% interest rate for 20 years, the EMI stands at ₹43,391. The 50 bps points hike will push your EMI to ₹44,986 – an effective hike of ₹595 per month.
Impact on Auto loans
Not just home loans, the EMIs on your auto loan will also have a bearing on your monthly expenses. Depending on the amount & tenure of auto loan, your EMIs will see a surge
For example
Rs 10 lakh loan @ 8.6% — for 15 years— your will pay EMI of ₹15,887
Rs 10 lakh loan @ 8.6% (+50 bps)– for 15 yrs— you will pay EMI of ₹16,140 – hike of ₹253 every month
Impact on Personal loans
The rate hike will also have a bearing on the personal loans.
Rs 3 lakh loan for 2 yrs – Interest rate @11.4% — EMI stood at Rs 14,038
Rs 3 lakh loan for 2 yrs – Interest rate @11.4% (50 bps)– EMI revised at ₹14,108 — increase of Rs 70.
The increased interest rate has come as double whammy for the common man, who is already under distress over inflated prices of goods & services. However, to cushion or buffer onself against this impact, one may consider getting the loan period extended.
