# Loans in India

> A loan is a long contract with a moving price. Know what your rate is linked to, what your lender must tell you when it changes, and which lever (EMI, tenure or prepayment) costs least.

Home, car and personal loans in plain English: how rates move, what your EMI really costs, and the rights RBI gives you as a borrower

_Last updated: 2026-10-18_

Canonical: https://www.tldr.money/loans

## How loan rates move

Most new floating-rate home and personal loans from banks are linked to an external benchmark, usually the RBI repo rate. RBI rules require the interest rate on these loans to be reset at least once every three months, so a repo change reaches your EMI quickly. Your rate is the benchmark plus a spread fixed in your loan agreement.

RBI raised the repo rate to 5.50% on 7 October 2026. For what that does to your EMI, with worked examples, read [repo rate hike impact on home loan EMI](/articles/loans/repo-rate-hike-home-loan-emi).

## EMI or tenure

When your rate rises, RBI requires your lender to let you choose between a higher EMI, a longer tenure or a mix of both. A longer tenure keeps your monthly outgo flat but usually costs far more interest over the life of the loan. If your budget can absorb it, a higher EMI is almost always cheaper.

## Prepaying a loan

Prepaying saves interest at your loan rate. For floating-rate loans taken by individuals for non-business purposes, RBI's pre-payment charges directions bar lenders from charging prepayment penalties on loans sanctioned or renewed from 1 January 2026. Before prepaying, clear expensive debt such as credit card dues and keep an emergency fund.

## Your rights as a borrower

- **Clear communication.** Your lender must explain at sanction how rate changes affect your EMI and tenure, and tell you straight away when either goes up.
- **Quarterly statements** showing principal and interest paid, EMIs left and the annualised rate.
- **A choice at reset** between a higher EMI, a longer tenure, or prepayment.
- **Transparent charges** for switching from floating to fixed, where your lender offers it.

Before you borrow, see how the EMI fits your monthly budget with the [in-hand salary calculator](/tools/in-hand-salary-calculator), and if you have savings to spare, compare prepaying with what deposits now pay in the [banking guide](/banking).