How interest rate cuts can improve your financial standing
In May 2015, the Reserve Bank of India had decreased the rate at which it lends to commercial banks by 0.25%. Interest rate cuts are made to regulate the amount of money available in the economy. Central banks like the RBI are allowed to buy and sell government-backed securities as a part of the rate control. Interest rate cuts also help to stimulate economic growth and help reduce inflationary pressure. This interest rate cut in India was long expected but stock market rates dropped. This also indicated that there might not be another interest rate cut for a while as the monetary policy will not be able to take a blow from inflationary pressure.
What is an Interest Rate Cut?
The RBI can make interest rate cuts due to inflationary pressure, government loans, or global economic conditions. When a rate cut happens, money is lent to commercial banks at reduced rates and technically, that benefit should be passed on to the consumer. But, a rate cut made by the central bank does not mean that commercial banks are bound to do the same. In fact, banks are allowed to make their own deposit and loan rates within a certain limit. So if you are getting a loan of any kind then you could feasibly try and negotiate cheaper interest rates. This is especially useful when dealing with long-tenure home loan interest rates. Several financial service providers and banks like Bajaj Finserv offer loans on lower interest rates and allow you to apply online for Home Loans effortlessly.
The Best Time for Homeowners and Home Loan Borrowers
For those of you who are paying off loans and are wondering if there will be an interest rate cut on home loans then you will be pleased to hear that if you have an existing home loan on a floating rate of interest, you will benefit from the interest cut. Most floating interest rates average at 10.4 to 10.9 percent per annum and the rate cut will likely bring those numbers down. If there is a large enough rate cut you could ask your loan provider to lower your EMI spending or to reduce your home loan tenure.
If you do not have a floating interest rate, you could ask your lender to flatly lower your interest rates. If you find that your current lender is not amenable to your requests, you could always refinance your loan and move to a bank that provides a more beneficial offer. Try taking loans from flexible and competitive organisations like Bajaj Finserv, who offer one of the lowest home loan interest rates at 9.85%.
Remember, this applies to pretty much every kind of loan out there. If you are taking a new home loan, this is the best time to get one as the rates will be much lower than usual and will help you financially.
Dump Your Debt
If you have expensive debts to pay, the period during an interest rate cut is the perfect time to close them and raise your credit score. Pay attention to your credit cards, as they usually demand the highest rate of interest. After the interest rate cut was announced by the central bank, credit card interest rates automatically decreased as well. If your credit card provider takes a while to enforce the interest rate cut, you could move to providers who offer better services. You could even try and apply for an Existing Member Identification (EMI) card. This card allows you to buy lifestyle products and pay for them on a monthly basis. Many financial service providers, like Bajaj Finserv, offer EMI Cards that can be obtained at attractive rates.
Even though a rate cut encourages people to spend, we would advise you to save by making an investment or getting a loan. An interest rate cut might not happen again for a while so it is best to maximise your gain while lending rates are low.