RBI cuts repo rate, potentially lowering personal loan rates

Personal loans are a common option for people in need of quick cash, especially for those without high-value assets to use as collateral. However, these loans often come with high interest rates. The Reserve Bank of India (RBI) can reduce these rates by cutting the repo rate, which in turn affects personal loan interest rates and EMIs. The repo rate is the interest rate at which the RBI lends money to banks. When the RBI cuts this rate, it lowers borrowing costs for banks. As a result, banks may lower the interest rates on personal loans for consumers. This can lead to reduced EMIs, which is the amount borrowers pay each month. Lenders may also respond to repo rate cuts by offering quicker loan approvals to attract borrowers. However, it is important to note that fixed interest rate loans are not affected by these changes, as their rates are set. For borrowers with floating rate loans, a cut in the repo rate can lead to direct benefits. Their interest rates will likely decrease, resulting in lower EMIs. Different banks have different policies regarding how much of the repo rate cut they pass on to borrowers. Some may pass on the full reduction, while others may only pass part of it. In summary, repo rate cuts can significantly lower borrowing costs, especially for those with floating interest rates. Borrowers should stay informed about these changes and compare loan offers, as the benefits can vary widely depending on the loan type and lender policies.