Why Your EMI Stays High Even as Interest Rates Fall

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Why Your EMI Stays High Even When Interest Rates Drop: Unpacking the Hidden Factors

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Moneycontrol•01-03-2026, 11:01

Why Your EMI Stays High Even When Interest Rates Drop: Unpacking the Hidden Factors

•Your EMI doesn't reset with every rate cut; it's governed by loan terms and predefined reset intervals.
•Banks often extend loan tenure instead of increasing EMI when rates rise, which can keep EMIs stable but prolong repayment.
•Older loans (Base Rate, MCLR) transmit rate cuts slowly; newer external benchmark loans may have adjusted spreads.
•Interest compounding in early years amplifies rate hike impact, making rate cut benefits smaller later.
•Top-ups, moratoriums, and fees can inflate EMIs, making them seem unresponsive to rate changes.

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