I had applied for a car loan but recently the bank reduced its repo rate. Will my loan be effective on new lower rates?


#1

I had applied for a car loan but recently the bank reduced its repo rate. Will my loan be effective on new lower rates?


#2

It all depends on which stage your loan application is at the present moment. If you have just applied for the automobile loan and your loan application is under consideration or under process you will get the benefit of the rate cut in the bank base rate. If however your loan has been disburses then you will not get any benefit on the reduced base rate.


#3

Hi Sohini,

Lending firms do not decrease rates automatically for existing borrowers when they start offering lower interest rates for new borrowers. It is also true that they charge a conversion fee for granting lower interest rates. This is irrespective of whether it is a bank or Non-Banking Finance Company (NBFC).

While some say that their conversion fee is a one-time charge, there are others who charge every time you want interest rates lowered. They do increase interest rates automatically when interest rates rise. Details about this will be mentioned in your loan agreement. If you are not happy with your Car Loan provider, you can consider a balance transfer. But do check the terms regarding the processing fee, conversion fee, and other charges before you do.

In case of prepayments, lenders should allow you to choose between reducing your EMI or your tenure. You can insist on having a lower EMI after your prepayment. We suggest that you talk to your bank about it.

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Cheers,
BB Expert