LIC home loan at 7.50%: Know how much your EMI will drop

In a move that brings relief to homebuyers, LIC Housing Finance has slashed its home loan interest rate by 0.50%, bringing the new starting rate down to 7.50% per annum. This follows the Reserve Bank of India’s recent repo rate cut from 6.00% to 5.50%, which has prompted several major banks including SBI, Union Bank, and Punjab National Bank to reduce their lending rates as well.

Who Benefits?

New Borrowers: If you're planning to take a new home loan, you’ll now pay less interest. For instance, SBI’s earlier starting rate of 8% may now come down to around 7.50%, translating to lower EMIs.

Existing Borrowers (Floating Rate): If your loan is linked to the Repo Linked Lending Rate (RLLR), your EMI will automatically reduce during your loan’s next reset cycle. Alternatively, your loan tenure might shorten.

Fixed Rate Loan Holders: You won't see immediate changes. But you can switch from fixed to floating rates by paying a nominal fee, which may be cost-effective if you’re in the early years of repayment.

How RLLR Works

RLLR is calculated by adding a margin to the repo rate.

Example:

Repo Rate: 5.50%

Bank Margin: 2.65%

RLLR = 8.15%

Your final loan rate may also include a credit risk premium based on your credit profile.

Common Questions Answered

Q1: Will existing borrowers benefit?

Yes, floating rate loans reset periodically based on the repo rate, as mandated by RBI. However, new borrowers may not receive the full benefit if banks increase their margins.

Q2: Can I switch from a fixed rate to floating?

Yes, you can switch to RLLR-based loans by paying a small fee. This can lead to long-term savings, especially if you're early in your loan tenure.

RBI Has Slashed Rates 3 Times This Year

This marks the third repo rate cut in 2025, totaling a 1% reduction:

Feb: From 6.5% to 6.25%

Apr: Another 0.25% cut

Now: 0.50% cut to bring it to 5.50%

Home Loan Tips to Keep in Mind

Check for Prepayment Penalties: Some banks charge fees if you repay your loan early. Always clarify this before signing.

Monitor Your CIBIL Score: A score of 700+ is considered good and can help you get better rates.

Compare Bank Offers: Don’t rush. Banks often run limited-time offers, so comparing across lenders can save you thousands.