I’ve been watching interest rates for a while and wondering what makes personal loan rates decrease? I know housing loans are linked to the repo rate, but do personal loan rates also get affected when RBI cuts rates?
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Here are a few situations where you may see lower personal loan interest rates:
- RBI Cuts the Repo Rate:
When the RBI lowers the repo rate, banks often get cheaper access to money. While it affects home and car loans more directly, some banks do pass on the benefit to personal loans, especially for high-credit-score customers. - Festive Seasons (Diwali, Dussehra, etc.):
This is the most common time to get discounted personal loan offers. Banks and NBFCs run special campaigns with lower interest rates, zero processing fees, and pre-approved offers. - When You Have a High Credit Score (750+):
Lenders are more likely to offer lower rates to low-risk customers. So if your credit profile is solid, you may be able to negotiate or receive a better rate, especially from private banks and fintech lenders. - When Banks Compete for Market Share:
Sometimes, banks and NBFCs drop rates temporarily to attract more customers, especially during financial year-end or target-pushing seasons (like March or October–December quarters). - Switching or Balance Transfer Offers:
If you already have a personal loan, some banks offer balance transfer options at a lower rate to win you over as a customer. These are worth checking if your current rate is high.
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Yes, personal loan rates can go down, but not as directly as home loans when the RBI cuts the repo rate. Since personal loans are unsecured, banks set rates based on credit score, income, and risk policies.
Repo rate cuts can have an indirect effect. When borrowing costs drop for banks, they may reduce personal loan rates to stay competitive. Rates also tend to dip during festive offers or when the economy slows. A better credit score or strong repayment history can also help you get lower rates.