Breaking News: Loans to get cheaper, Cheer up!
If you are an individual waiting on the sidelines for good news on the interest rate front, this article is apt for you. The good news has been pouring in on the interest rate front with repeated cuts in repo rate and cash reserve ratio. If you are wondering how this is going to affect you, below is the answer.
Now that the inflation has slipped to a manageable level, the government and RBI are keen on reversing some of their earlier moves. In addition, the existing financial crisis across the globe coupled with tight monetary policy has affected the growth of the economy as companies are devoid of funds. In the coming days, the picture could change for the better.
Hence, for those looking to avail loans, life is likely to get a lot better. To start with, home loans and personal loans are likely to get cheaper by at least 0.25-0.5%. Over a period of 6-9 months, there could be another round of fall and we may go back to the days of home loans of 10-11%. As you are aware, the rates in recent times had touched 13% level in the last couple of quarters and increased the EMI by a few thousand rupees for many. In fact, the rising interest had forced many to abandon floating rate option. Now that the noise for softer interest rate regime is getting louder, you can go back to the option of floating rate.
While banks are still not rushing to announce their new lower rates, the trend is likely to get more visible in the coming months. As of now, the fresh rates are applicable only for fresh loans and it may take a while for existing borrowers to enjoy the cut in interest rates. While car and personal loans are least affected as their rates are fixed (at the time of borrowing), the fall in interest rate is good news for home loan borrowers. And the good news is that government, with general elections round the corner, is in no mood to antagonise the voting population. That is one of the reasons why the Union Finance Minister, P Chidambaram, has taken it upon himself to induce banks to lower the rate cut. If you are a borrower or looking for a loan, you are sure to love the FM!
