Are personal loans become expensive due to banks raising rates?



The increased interest rate by the banks will influence the personal loan and its repayment tenure. A personal loan is always based on the interest rate, and its repayment will be expensive for those planning to borrow it. The existing loan, which has a floating interest rate, will also be changed per the rule, whereas the fixed interest rate for the current loan will remain the same.

Suppose you are planning to borrow a loan to purchase a home and have fixed the repayment for 20 years, then there will be an increase in the EMI.

The change in EMI as per the increase rate will be like this. If you get the home loan for 30 lakh at 7% interest and the time is for 20 years.  Your EMI will be Rs. 23259, whereas the EMI, after increasing at the rate of 0.9%, your EMI will be 24907. So, there is an increase of Rs.1648. in this way, one will have to pay Rs. 3,95,520 more compared to the previous rate. It will increase the cost of the number, equal to sixteen EMI.

These are the financial impact of a personal loan or home loan. Similar cost effects will be implemented on the car loan and personal loans.

Some optimistic views for a personal loan

The increased interest rate will impact the repayment and overall cost, it is true, but the benefits of a personal loan will remain the same for every household, salaried person, business person, etc. There will be an increase of a few amounts, but it will not be a mature decision to withdraw from getting a personal loan for your urgent requirements. A personal loan is always there as financial support for different occasions when you can’t arrange the cash in a lump sum and have to purchase the home, car, etc. At that time, you can use it to fulfill your desire and essential requirements.

Benefits and rebates on taxes

Even after the increase in the interest rate on a personal loan, home loans, car loans, etc., you will be able to get the tax benefits on your interest payments per annum. There are provisions of the tax rebates if your total paid amount for the claim is up to 1.5 lakhs or two lakhs.  Any individual can claim up to Rs.2,00,000 for his interest payment for a home loan under section 24 of the income tax act. So, returns benefit if you pay an amount on interest. Accepting the reality of the increase in interest, one can’t deny these benefits on a home loan.

Some changes or options minimize the interest or the overall cost. You can apply it in different ways.

You can choose a hybrid loan

While getting a loan, you can choose the fixed rate for a few tears and then convert it into a flexible interest. Generally, the interest on a fixed interest rate is slightly higher than the floating interest rate. So, the overall interest can provide some relief to your budget.

Negotiate with a high credit score

You can bargain for a lower rate if your credit score is excellent. The lenders consider a good credit score for some relaxation on the interest rate. Once you can deal with less percentage, you will have to pay less on the overall cost. You can save a good amount.

You can extend your tenure

With the increase in the interest, the EMI will increase, but to pay it quickly, you can request lenders for the extension of tenure that can provide some relief in your monthly EMI payment.


After all, we can’t deny the impact of the repo rate increase on a personal loan. Still, there are many benefits from the loan services, like your dream of owning a house becomes accurate with the financial support of the banking or financial institutions. Your dream car can be at your home; your students will not have to compromise their opportunities due to institution fees, etc. You will be able to avail of a loan quickly with your good credit score, and you can get it at the neediest time.