# How Home Loan Interest Rates Work: Repo, EBLR, MCLR in Plain English > Why did your home loan rate change, and why is it different from the rate in the ad? A simple guide to repo rate, EBLR, MCLR and spread, and how to check yours. - **Published**: 2026-11-05 - **Modified**: 2026-11-05 - **Category**: loans - **URL**: https://www.tldr.money/articles/loans/home-loan-interest-rates-explained --- New to loans? Start with the [loans guide](/loans). This page explains **how your home loan rate is set, why it changes, and why it might be higher than the ad**. ## The short answer Your rate is made of two parts: > **Your loan rate = benchmark + spread** - The **benchmark** goes up and down with the economy. For most bank loans, it follows the RBI repo rate. - The **spread** is the bank's extra margin for your loan. It is set when you take the loan and normally stays the same. When the benchmark moves, your rate moves by the same amount.
- **Repo rate**: the rate at which RBI lends to banks. Now 5.50% (since 7 October 2026). - **EBLR** (external benchmark lending rate): a loan rate linked to an outside benchmark, usually the repo rate. Some banks call it **RLLR** (repo-linked lending rate). - **MCLR** (marginal cost of funds based lending rate): an older system where each bank sets its benchmark from its own costs. - **Spread**: the fixed margin added on top of the benchmark for your loan. - **bps** (basis points): 100 bps = 1%. A 25 bps hike = 0.25%. More in the glossary: [repo rate](/glossary/repo-rate), [EBLR](/glossary/eblr), [MCLR](/glossary/mclr).
## A worked example Say your bank's repo-linked lending rate (RLLR) is 8.15%, and your spread is 0.35%. | Part | Rate | |---|---| | RBI repo rate | 5.50% | | Bank's margin on top of repo | 2.65% | | = Bank's RLLR | 8.15% | | + Your spread | 0.35% | | **= Your loan rate** | **8.50%** | If RBI raises the repo rate by 0.25%, the RLLR becomes 8.40% and your rate becomes **8.75%**. Your spread does not change. For what the 7 October 2026 hike did to real bank rates and EMIs, see [repo rate hike: impact on your home loan EMI](/articles/loans/repo-rate-hike-home-loan-emi). ## The three kinds of loan rate | Type | Linked to | How often it resets | Who has it | |---|---|---|---| | **EBLR / RLLR** | RBI repo rate (or another outside benchmark) | At least every 3 months | Most bank floating-rate home loans since 1 Oct 2019 | | **MCLR** | The bank's own funding cost | Usually every 6 or 12 months | Bank loans from April 2016 to Sept 2019, and some later | | **Base rate / BPLR** | The bank's own older formula | Slow and irregular | Very old loans, before April 2016 | **What this means:** - **EBLR loans move fast.** You feel a repo cut quickly, and a repo hike quickly. - **MCLR loans move slowly.** Good when rates are rising, bad when they fall. - **Base-rate loans are often the most expensive.** If you still have one, check your rate today.
RBI's repo-linking rule applies to banks. Housing finance companies and NBFCs usually link loans to their own benchmark, often called a **PLR** (prime lending rate). It can move whenever the lender decides, so ask how often it has changed.
## Why your rate is higher than the ad Bank ads say "home loans **starting from** 7.5%". That rate is for borrowers with: - a high [credit score](/articles/loans/credit-score-for-loan), often 800 or more - steady salaried income - a smaller loan compared with the property value Your spread is set by your own profile. Two people at the same bank, on the same day, can get different rates. A better score can mean a lower spread. See [how to improve your credit score](/articles/loans/improve-credit-score). ## Can your bank change your spread? For EBLR loans, RBI says the **credit risk part of your spread can change only if your credit profile changes a lot**, as agreed in your loan contract. Your bank cannot raise it just because it wants to. But your spread also will not fall on its own. New customers often get a lower spread than older ones. That is why it pays to check. ## How to check your rate in 5 minutes 1. **Find your sanction letter or latest statement.** Look for the benchmark name (RLLR, EBLR, MCLR, base rate) and your spread. 2. **Note your current rate.** 3. **Compare it with the rate your bank offers new borrowers** with a similar profile. It is on the bank's website. 4. **If you pay 0.5% or more above new borrowers**, ask your bank to lower your spread. Many offer a "conversion" for a small fee. 5. **If they say no**, look at a [home loan balance transfer](/articles/loans/home-loan-balance-transfer) to another lender.
You can usually switch to your bank's repo-linked rate. Ask for the new rate and the conversion fee in writing, then work out whether the saving beats the fee. Use the [home loan EMI calculator](/tools/home-loan-calculator) to compare the two EMIs.
## Fixed rate or floating rate? - **Floating rate**: moves with the benchmark. Most home loans in India are floating. No prepayment penalty for individuals on loans sanctioned or renewed from 1 January 2026. - **Fixed rate**: stays the same for a set period, but usually starts higher. It may carry prepayment charges. At each rate reset, RBI's rules say lenders must let you switch to a fixed rate if they offer one. Check the switching charge first. More in [your rights as a home loan borrower](/articles/loans/home-loan-borrower-rights-rbi). ## Read next - [Increase EMI or tenure when your rate goes up?](/articles/loans/increase-emi-or-tenure) - [Home loan balance transfer: when it is worth it](/articles/loans/home-loan-balance-transfer) - [What credit score do you need for a loan?](/articles/loans/credit-score-for-loan) - [Home loan EMI calculator](/tools/home-loan-calculator) ## Sources - RBI, External benchmark based lending, circular dated 4 Sep 2019: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=11677 - RBI, Master Direction on Interest Rate on Advances (MCLR framework) - RBI, Reset of floating interest rate on EMI-based personal loans (updated 1 Oct 2025): https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12529 - RBI, Monetary Policy Statement 2026-27, 7 Oct 2026: https://www.rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=63742 - Example rate build-up: illustrative, based on a repo-linked lending rate of 8.15% reported for Bank of Baroda from 8 Oct 2026 --- - [More loans articles](https://www.tldr.money/articles/category/loans) - [All articles](https://www.tldr.money/articles)