Finance & banking News: Buying a car or two-wheeler is about to become more affordable for indian consumers, thanks to the Reserve bank of India’s (RBI) latest monetary policy decision.
RBI Rate Cut Details
- Repo Rate Reduced: 25 basis points, now 5.25%
- Total Reduction in 2025: 1.25% (four cuts this year)
- Significance: This is the lowest repo rate since July 2022, making borrowing cheaper across the economy.
How This Affects auto Loans
Lower EMIs:
Banks and NBFCs typically link car and bike loan interest rates to the repo rate.
With the rate cut, monthly EMIs for auto loans will decrease, reducing the financial burden on borrowers.
Interest Savings:
Over the course of the loan, borrowers could save thousands of rupees in interest payments.
Longer-term loans benefit the most, as cumulative interest reduces with lower rates.
Cheaper Two-Wheeler Loans:
Bike loans, which are usually smaller in value, will also become more affordable, especially for first-time buyers or students.
Example of Potential Savings
Assuming a ₹10 lakh car loan over 5 years:
- Previous EMI (6% interest): ~₹19,330
- New EMI (after 25 bps cut, approx. 5.75%): ~₹19,120
- Monthly Savings: ~₹210
- Total Savings Over Loan Tenure: ~₹12,600
Exact savings will vary based on the bank, loan amount, and tenure.
Tips to Make the Most of the Rate Cut
Check Loan Options:
Compare banks and NBFCs for repo-linked loans, as rates may vary.
Consider Prepayment:
Lower interest rates provide an opportunity to prepay part of the loan, further reducing interest outgo.
Negotiate EMIs:
Borrowers can request revised EMIs after the rate cut to immediately benefit from lower monthly payments.
Evaluate Loan Tenure:
Shortening the loan tenure while paying slightly higher EMIs may save more on cumulative interest.
Conclusion
The RBI’s repo rate reduction to 5.25% makes auto loans cheaper and more attractive, benefiting car and two-wheeler buyers. Borrowers should review their current loans and consider refinancing or adjusting EMIs to maximize savings.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk..jpg)
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