The Impact of Demonetisation On Loan Interest Rates
The demonetisation of old currency has opened up exciting possibilities for the Indian loan sector. As many lakhs of people deposited their money in the banks at the same time, lenders in India are now flush with liquid cash. This makes it easier for them to offer more loans. Besides, they can do so at competitive rates of interest. Demonetisation has indeed had big impacts on different kinds of loans.
Slash in deposit rates
Many banks and non-banking finance companies (NBFCs) have slashed the interest rates on deposits. So, your fixed deposits may earn less. But this is a good indicator of the trends in the loan segment. Paying lower interest to customers on their deposits helps lenders to cut costs. Thus, they have more leeway for lowering their loan interest rates. This is good news for borrowers.
Effect of Demonetisation on Personal Loans
Personal Loans are among the most expensive types of loans. They charge high rates of interest. But now that lenders are slashing interest rates, Personal Loan borrowers could benefit. They may hope to get the loans at lower rates. Remember, each equated monthly instalment (EMI) on a loan has two components:
- a principal component and
- an interest component.
If the interest component reduces, the EMIs reduce. As a result, the cost of the loan falls.
This is good news for both borrowers and lenders. Borrowers who need financial aid can borrow more efficiently. Meanwhile, lenders can increase their scope of business as the demand for loans rises.
Effect of Demonetisation on Home Loans
The home loan sector has already seen a massive impact due to the demonetisation drive. Many property transactions used to happen with ‘black money’ in the past. But with the crackdown, there has been a check on black money transactions. This has led to a sudden slump in the real estate market. Lenders are trying to see the real estate market through this challenging phase. They are offering home loans at reduced rates.
Good time to Take a Loan
Are you planning to apply for a Personal Loan or a home loan? This is a good time to do so. Check out online loans. You could get the loan instantly if you meet the requirements. But make sure to check eligibility first. Do this before you apply for a loan. It will help you understand exactly how much you can borrow and at what rate.
The financial market is one of the most volatile markets. So, do not wait to see if the trends change again. Speak to your lender to understand the rates and the EMI calculations. Find out about the other terms and conditions of the loan you need. This will make it easier for you to get the best loan at the best rate.
The bottom line
Demonetisation has had a big impact on Personal Loans and home loans, among others. With the interest rates are falling, it is a great time to be a borrower. Find out more about the different kinds of loans offered by Bajaj Finserv, one of India’s most trusted NBFCs and see how you can make the most of the market scenario.