Loan News – Banks have raised interest rates for “Auto and Personal loans”, How will it impact your EMI?

Nowadays loan have become a need for all individuals, whether it’s buying a car, bike, television, or any other goods, most of the commodities are purchased by individuals through loans. Hence this news of increase in loan interest rates becomes very important as it will directly impact our pockets and monthly budget.

Banks have raised their MCLR – marginal cost of lending rates

What is MCLR ?

MCLR was introduced in April 2016, MCLR rate means the minimum rate of interest a financial institution needs to charge for a certain type of loan, except in certain cases.

Increase in MCLR rate will have an impact on loans such as auto loans, floating rate house loans and personal loans. This decision was taken by banks even though RBI has has not changed its REPO rate. (REPO rate means the rate at which RBI grant loan to banks).

Lower MCLR will have a positive impact on your pocket as you will be paying EMI with lower rates of interest and higher MCLR will have an adverse impact as you will be paying EMI with higher rate of interest

The good news is there will be no change in Fixed home loan rates as they are linked to REPO rate which has not changed

1. SBI has increased its auto loan to 8.85% for clients who have good credit score, which was previously being charged at 8.65%
2. Bank of Baroda is charging 8.8% on auto loans, previously which was being charged at 8.7%
3. IDFC first bank has increased its personal loan rates to 10.75% which was previously being charged at 10.49%

It’s just an inclusive list for your reference, there are several other banks that have increased their rates of interest.

Impact of MCLR on new and existing borrowers

Increase in the marginal cost of lending rate – MCLR will have an impact on both, existing borrowers as well as on new borrowers. The new borrowers will now get loans at a higher rate of interest, while for existing borrowers this revised MCLR rate will impact their future installment i.e. EMI at an increased rate of interest. However, the increased MCLR rate will affect the loans of existing customers from the next reset date.