A personal loan provides credit to a borrower, which he can utilise for varied purposes. A personal loan must be repaid between 2 to 5 years with interest. These unsecured loans do not have collateral security backed up, and therefore, in case of default of loan payment, the debtor does not need to lose anything. But the defaulter may have to face legal actions taken against him by the creditor in case of default done after multiple reminders.
People who want to apply for a personal loan must keep several points in their minds to choose a perfect personal loan with a low-interest rate. In comparison to the leading private sector banks, the public sector banks offer cheaper interest rates on personal loans. The personal loan interest rate varies from one bank to another, and some are higher in comparison to others. So before choosing a personal loan, a personal loan interest rate calculator can help to determine the financial liability that the person needs to take up after he gets the loan approval.
The Reserve Bank of India has retain the repo rate at 4 percent unchanged for the seventh time in a row. This decision may not affect the borrowers, but the savers are not happy with the news. Keeping the inflation at the target level, the Reserve Bank of India has decided to maintain an accommodative monetary policy to promote growth. The growth in the rates of covid-19 infection has given birth to economic uncertainty in the entire country. The government is now trying to focus on restricting the spread of it.
The repo rate indicates the rate at which banks and other Financial Institutions borrow money by selling their securities to the Reserve Bank of India. Reserve Bank of India this repo rate to signal the monetary policy and thereby for maintenance of liquidity. This is particularly used to keep inflation under control. As the repo rate remains unchanged, interest rates of loans can witness a hike.
If there was a cut in the repo rate, it would mean that the cost of funds in the bank will be reduced. When the repo rate faces a rate cut, the cost of borrowing will also be lower for the commercial banks. If the repo rate gets low, the lending interest rates for loans also get lower. This helps the borrowers to get more funds and the lending Institutions to prosper.
This will result in, Banks increasing the interest rates on loans like home loans, car loans, personal loans, etc. If the Banks decide to increase or decrease their risk premium or margin on loans, then there are chances that the interest rate on loans will not get affected. People planning to take a personal loan should wait for a while as the RBI can change its decision on key rates in the upcoming policy review. But the existing loan may not see any change in their monthly instalments.
It is now made mandatory that all floating-rate retail loans taken from the Bank must be linked to the repo rate as per the instructions of The Reserve Bank of India. Except for some banks, most of the banks may not reduce the Fixed Deposit rates across the period.
A personal loan Axis Bank, from any different bank, can be an ideal partner if a person needs to pay immediate expenses, plan to go for a holiday, or manage debt consolidation. Usually, personal loans do not need any collateral, which makes them a little expensive. But is not at all true that a personal loan can not be acquired at a lower interest rate.
