Interest rates change What it means for your loans and savings?

Interest rates move more often than most people realize. You might hear about the Reserve Bank of India (RBI) “hiking” or “cutting” rates in the news, but what does that actually mean for your money? Whether you’re paying EMIs or planning to grow your savings, understanding these rate changes can help you make smarter financial decisions.

In simple terms, an interest rate is the cost of borrowing money or the reward for saving it. When the RBI changes its key policy rate, it influences how expensive or affordable money becomes for banks.

Let’s look at how these shifts actually play out in everyday banking.

How does it affect your loans?

When the RBI raises interest rates, banks usually follow. This means the cost of borrowing goes up, your home loan, car loan or personal loan EMIs may increase.

If your loan has a floating interest rate, your EMI or loan tenure could automatically adjust. A fixed-rate loan, on the other hand, will stay unchanged until the end of the agreed term.

For example, a small increase of 0.5% might not seem like much, but on a long-term home loan, it can add up to thousands over time. That’s why it’s smart to keep an eye on RBI announcements and review your repayment plans when rates shift.

How does it impact your savings?

The same rate changes can also work in your favor. When banks raise lending rates, deposit rates often go up too. This means your Fixed Deposits (FDs) and Recurring Deposits (RDs) could start earning more interest.

It’s a good time to lock in higher rates with longer-term deposits. Conversely, when rates fall, it may be wiser to keep your deposits short-term until better rates return.

Your savings account rates may also adjust, so periodically reviewing where your money is parked can help you make the most of your returns.

How to plan around changing rates

For borrowers: Whenever rates rise, consider prepaying a part of your loan or negotiating a better rate with your bank.
For savers: When rates are high, lock in long-term deposits. When they drop, look for flexible or short-term options.
For investors: Keep a mix of fixed and market-linked investments to balance risk and return during rate fluctuations.

At Karur Vysya Bank, flexible loan structures and a wide range of savings options make it easier to adjust your financial plans as rates move, helping you stay steady through the ups and downs.

Pro tip:

Don’t rush to react to every rate change. Instead, review your overall financial plan once or twice a year. Staying calm, informed and flexible is the real key to making interest rates work in your favor.

17 November 2025

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