SBI Home Loan Becomes 0.50% Cheaper: Now loans will be available at 7.50% interest; understand here how much your EMI will reduce.

The State Bank of India (SBI) has reduced its loan interest rates by 0.50%. After this cut, taking any kind of loan from SBI has become cheaper. Now, SBI's home loan interest rates will start from 7.50% per annum.

Recently, the Reserve Bank of India (RBI) reduced the repo rate from 6.00% to 5.50%. Following this move, banks have also started lowering interest rates on FDs and loans. Prior to SBI, Union Bank and Punjab National Bank had also reduced their loan interest rates.

The State Bank of India (SBI) has reduced its loan interest rates by 0.50%. With this reduction, all types of loans from SBI have become more affordable. Now, SBI's home loan interest rate will start from 7.50% per annum.

The Reserve Bank of India (RBI) recently reduced the repo rate from 6.00% to 5.50%, prompting banks to cut interest rates on FDs and loans. Union Bank and Punjab National Bank had already reduced their loan interest rates before SBI.

Who Benefits from This Rate Cut?

This benefit will apply to all borrowers whose loans are linked to the Repo Linked Lending Rate (RLLR).

For New Borrowers:
If you're planning to take a new home loan, you'll now be charged lower interest. For instance, earlier SBI’s home loan rate started at 8%. Now it has been reduced to around 7.50%.

For Existing Borrowers:
If you already have a floating-rate home loan linked to RLLR, your interest rate will also decrease during the next reset period. This means either your EMI will reduce, or your loan tenure will shorten. However, if your loan is on a fixed interest rate, you won’t benefit from this cut.

How RLLR Works

Banks set their loan interest rates based on RLLR. When the repo rate drops, RLLR also drops, which reduces loan interest rates. Banks add a margin over the repo rate to cover their expenses and ensure profit.

Example:

Suppose RBI’s repo rate is 5.50%
Bank adds a margin of 2.65%
Then, RLLR = 8.15%

Banks also add a credit risk premium, based on your credit profile.

If RLLR = 8.00% and your credit premium = 0.5%
Then, your final home loan interest rate = 8.5%

Two Important Questions Answered

Q1: Do old and new borrowers benefit equally?
A: According to RBI rules, floating rate loans must be periodically reset based on the current repo rate. So, existing borrowers automatically benefit from repo rate cuts.
However, new borrowers may not get the full benefit, because banks might increase the margin (spread) to protect their profits.

Q2: Can fixed-rate loan holders switch to floating (RLLR)?
A: Yes. If your loan is based on MCLR or a fixed rate, you can request the bank to switch it to RLLR. This may involve a small fee. If you’re still in the early years of your loan, switching can save you money in the long run.

Repo Rate Cut 3 Times This Year: Total Cut of 1%

In February, RBI reduced the rate from 6.5% to 6.25% — first cut in 5 years.
In April, another 0.25% cut was made.
Now, a third cut brings the total repo rate reduction to 1%.

3 Things to Keep in Mind Before Taking a Home Loan

Check for Pre-Payment Penalty
Some banks charge a penalty if you repay your loan early. Ask your bank for complete details, as early repayment reduces the bank’s interest earnings.
Monitor Your CIBIL Score
Your CIBIL score reflects your credit history. A good score (700+) improves your chances of loan approval and better rates. This score is calculated based on your repayment behavior, credit utilization, ongoing loans, and timely bill payments.