How do changes in RBI policy impact interest rates on used car loans?

Every time the RBI (Reserve Bank of India) changes its monetary policy, especially the repo rate, it starts a chain reaction which in turn affects the interest rates you see on used vehicle loans. The repo rate is the interest rate at which banks can borrow from the RBI, and practically, when the RBI cuts the repo rate banks have a much cheaper source of funding. Banks will pass on that cost to you in the form of cheaper lending rates, which effectively saves you money on your used car loan.

On the contrary, increasing the repo rate will also increase the cost of borrowing through banks, which includes loans for used vehicles. Technically, this makes your loan more expensive and can even be a deciding factor in the time it takes to process your application for a loan.

It is also worth mentioning the differences between fixed and floating interest rates. With fixed rate loans, your EMI will remain unchanged with any movement upward or downward in RBI policy. Your loans taken out will be fixed for the duration as selected (for you = either a 36 or 48 month loan) - fixed loans provide certainty to the borrower. The floating rate loans will generally have rates called or determined by ""benchmarks"" (which the repo rate is) - meaning when the RBI cuts your EMI, but on the contrary, when they increase it, so do your repayments.

So, keeping an eye the RBI announcements and industry trends will assist you in figuring out the right time to apply for the loan.