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Why you should delay a decision for a bank loan?


Why you should delay a decision for a bank loan?
In its monetary policy review on Tuesday, the Reserve Bank of India clearly signaled that its intention hence forth would be to focus on growth and not inflation. This means that going forward, it's almost certain that the RBI is likely to cut repo rates (interest rates), beginning from its next policy meeting in January.

Repo rates are the rates at which the RBI lends to commercial banks and any lowering of these rates helps to reduce interest rates for banks.


This means that interest rates are likely to fall and investment analyst are hoping that the RBI will drop repo rates by at least 50 basis points by March. In all probability this is likely to be passed on by banks to consumers, which means that loans are likely to become cheaper.

Therefore, if you can postpone a decision for a personal loan or an auto loan for another six months you are likely to get loan for 0.50% lower.

On the other hand, if you are an investor in fixed deposits, you would do well, if you put money in fixed deposits keeping a long term perspective in mind. This is because interest rates are set to fall and you would have blocked your money for a longer period at a higher interest rate today.

It's possible that one year from now, interest rates would reduce by at least 100 basis points or 1 per cent. Therefore, investors are advised to place money in deposits ranging from one year to 5 years. Most of the banks have reduced interest rates over the last one year from peak rates of 10 per cent to the current rates of 9 per cent. Going forward they are likely to reduce further. So, the best time to invest in bank fixed deposits is today.

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