Home loan interests getting lower due to Repo Rates
People who take loans from the bank are usually at a fixed interest rate or in a floating interest rate. When it is fixed, the interest might be in a higher range, but it won't change if the repo rates set by the RBI are changing. If it is a floating interest rate, it will change whenever the RBI makes changes to the repo rate. The biggest question that everyone might have is about what is repo rate is and why it is affecting our loan interest rates.
Repo Rates
Let's first understand what the Repo rate is all about. Bank lends its money from the RBI at a particular rate of interest and that rate of interest is the repo rate. Bank lend money from the RBI and give us individual loans at a slightly higher interest rates, as we cannot lend money directly from the RBI. This repo rate is something that can change several times in a year based on inflation and how the currency is doing in general.
When the RBI changes the repo rate, the banks will also change the interest rate with individuals. This is how the change happens. It does not mean that the rates will go down; there are instances where the repo rates can go high, and repo rates can go down.
My loan interest rate got reduced
I have a home loan and have been paying my interest for the past two years. I also do some extra payments at times to see if I can reduce the overall value by reducing the tenure. The rate of interest keeps changing based on the RBI repo rate. In the last one year, the repo rates have reduced by 1% which is a huge number, and correspondingly, that has reduced my interest rate as well. Now the interest rate looks similar to that of the bank FD rates.
This makes me feel that it may not be a great idea to close off the loan soon, but instead, do some investments if I have any additional money. Nobody would give me a loan for a value similar to the FD value. I'm glad that the bank is giving it in the form of Home loan, and it may be wise to use the additional money to do some investments elsewhere and just keep paying the monthly installments alone.
Some people have a different perspective and they advise saying that it is always a good idea to close of the loan sooner than keeping an active loan. I also agree with that perspective, but this repo rate reduction up to 1% is tempting me to do investments outside and keep holding the Home loan because nobody would give me money for this low percentage if I need it for something else.
If you like what I'm doing on Hive, you can vote me as a witness with the links below.
 |
 |
 |
Posted Using INLEO
This post has been manually curated by @bhattg from Indiaunited community. Join us on our Discord Server.
Do you know that you can earn a passive income by delegating your Leo power to @india-leo account? We share 100 % of the curation rewards with the delegators.
100% of the rewards from this comment goes to the curator for their manual curation efforts. Please encourage the curator @bhattg by upvoting this comment and support the community by voting the posts made by @indiaunited.
This post has been manually curated by @bhattg from Indiaunited community. Join us on our Discord Server.
Do you know that you can earn a passive income by delegating to @indiaunited. We share more than 100 % of the curation rewards with the delegators in the form of IUC tokens. HP delegators and IUC token holders also get upto 20% additional vote weight.
Here are some handy links for delegations: 100HP, 250HP, 500HP, 1000HP.
100% of the rewards from this comment goes to the curator for their manual curation efforts. Please encourage the curator @bhattg by upvoting this comment and support the community by voting the posts made by @indiaunited..
This post received an extra 20.00% vote for delegating HP / holding IUC tokens.
It’s already over two years I guess it’s better to see it to the end but I’m sure you will figure out the best option.
!PIMP
I feel if the interest rate won't rise then you can continue to use the money to invest in other things that will benefit you more
I would close the loan ASAP, until you repay it, the house is never yours and the bank can take it
I have never taken a home loan, but I wish I can if I have the initial capital to buy a bigger coumpound hme in the future.
Over here, the floating rate can be really dangerous as the rate will be a lot higher, and we need to really asks the detail about the payment.
but in case you get lower interest rate, then it would be awesome, as you said you can use the fund for investment outside, otherwise I think it is better to finish the loan sooner when you can. I wish you all the best my friend, as I believe you know which is better suit your condition.
Congratulations @bala41288! You have completed the following achievement on the Hive blockchain And have been rewarded with New badge(s)
You can view your badges on your board and compare yourself to others in the Ranking
If you no longer want to receive notifications, reply to this comment with the word
STOPCheck out our last posts: