How does a change in the MCLR rate affect existing loan borrowers?
Curious about MCLR Rates
A change in the MCLR (Marginal Cost of Funds Based Lending Rate) can affect existing loan borrowers in a couple of ways:
1. Reset of Interest Rate: If you have a floating rate loan linked to the MCLR, a change in the MCLR will lead to a reset of your loan's interest rate. When the MCLR increases, your interest rate and subsequent EMIs (Equated Monthly Installments) may increase, resulting in higher borrowing costs. Conversely, when the MCLR decreases, your interest rate and EMIs may decrease, providing some relief in terms of lower repayment obligations.
2. Impact on EMI and Loan Tenure: A change in the interest rate due to a revision in the MCLR can impact your monthly EMI amount and the overall tenure of the loan. If the interest rate increases, your EMI may go up, and if the interest rate decreases, your EMI may decrease. However, in some cases, lenders may choose to adjust the loan tenure instead of changing the EMI amount, meaning that a higher interest rate may result in a longer loan tenure, and a lower interest rate may result in a shorter loan tenure.
It's important for existing loan borrowers to stay updated with the changes in the MCLR announced by their lending institution. Lenders are typically required to communicate any changes in the interest rate to borrowers, providing them with adequate notice. If you have any concerns or questions about the impact of MCLR changes on your loan, it's advisable to reach out to your lender for clarification and guidance.