Market Update: Personal Loan Interest Rate Predictions

The current prediction regarding Personal Loan interest rates is that they are likely to remain stable, given the stability of the repo rate. For now, the RBI (Reserve Bank of India) has decided to focus on controlling inflation, pausing repo rate cuts. That being said, a few experts anticipate a minor decrease in the interest rates later this year, given that everything is aligning well. Let’s take a closer look at current Personal Loan interest rate predictions, the factors influencing them, and what it means for you as a borrower.

The Current Prediction: Stability Followed by a Potential Dip

The RBI’s Monetary Policy Committee met from August 4 to 6, 2025, where RBI Governor Sanjay Malhotra announced that the repo rate would remain unchanged at 5.50% since the previous 50 bps drop in June. Analysts expect the repo rate to remain at current levels through 2025, with a slight chance of a decrease later this year. Experts believe that if inflation stays under control and the economy remains stable, the RBI may reduce rates slightly by 0.25%.

Inflation fell to 2.1% in June, but since core inflation remains above 4% and global risks, such as U.S. tariffs, persist, the RBI is being cautious, despite GDP growth being expected at 6.5%.

The repo rate directly influences loan interest rates; its stability means Personal Loan interest rates stay unchanged after earlier cuts. Borrowers with loans under the EBLR (External Benchmark Lending Rate) framework can also expect stability for the near future, though any changes would naturally impact them faster.

Also Read: How Does Repo Rate Increase Affect Your Finances?

What This Forecast Means for You as a Borrower

With short-term stability in place, borrowers now find a predictable and relatively safe turf to stand on. Here’s what it could mean for Personal Loan applicants:

• For New Loan Applicants: There is no compelling reason to forever delay your financial plans in the hope that there may be a slightly lower rate tomorrow. The current stable rates facilitate precise financial planning. The best way is not to time the market but to make your own application strong enough to secure the best terms possible.
• For Existing Borrowers (Fixed vs Flexible Rates): Borrowers with fixed interest rates remain unaffected by repo rate changes and market fluctuations. Borrowers with flexible or floating rates that vary directly with benchmark rates can also expect stability for the most part, and a potential, albeit slim, chance of a dip later this year.

Also Read: How to Negotiate Better Personal Loan Interest Rates

Breaking Down the Factors Driving Interest Rate Predictions

Predictions for Personal Loan interest rates are based on key economic indicators, several of which we’ve mentioned above. Knowing about these indicators helps you understand why rates change alongside.

• RBI’s Repo Rate: The repo rate is the rate at which the RBI lends money to banks and NBFCs; a higher rate makes borrowing expensive for banks, which is why banks increase their interest rates. As of August 2025, the repo rate is steady at 5.50%, allowing the economy to absorb the collective 100 bps cuts since February. Because the repo rate is steady, Personal Loan EMIs remain unchanged.
• Inflation Path: The RBI’s inflation target is 4% until March 2026, at which point the central bank will reassess this percentage. When inflation rises, it either holds or hikes the repo rate, which in turn increases borrowing costs. When inflation falls and remains stable for an extended period, the RBI can lower the repo rate; this is quickly reflected in lower loan interest rates for borrowers, especially under the EBLR framework.
• Economic Growth: The RBI adjusts borrowing rates to support economic growth while ensuring inflation stays under control. If growth starts to fall significantly, the central bank may be forced to cut interest rates to lower the borrowing cost and thereby spur investment and consumption.
• Global Cues: The RBI’s policy is influenced by global factors, not just domestic conditions. Here are the main ones under consideration:
  • US tariffs: Tariffs of up to 50% on Indian exports linked to Russian oil purchases are weighing on external demand and adding caution.
  • Global rates: The US Federal Reserve has signalled possible rate cuts in September, creating expectations that may shape RBI’s approach.
  • Oil and geopolitics: Volatile oil prices and ongoing geopolitical risks continue to add pressure on inflation and external stability.

Also Read: Understanding How Interest Rate Fluctuations Impact Your Loans

How a Future Rate Cut Could Affect Your EMI: An Example

Any cut in interest rates, even a small one, is a significant saving for any borrower. For instance, analysts have indicated that there remains a slim possibility for another 0.25% cut in the repo rate later in 2025. Such a rate cut would mechanically lead to a reduction in lending rates under the EBLR ecosystem. Suppose you wanted to secure a Personal Loan.

We will assume the following:

• Loan Amount: INR 12 Lakh
• Tenure: 7 Years (84 months)

The following table shows the difference of 50 basis points in the rate for your monthly payouts and total interest.

This shows that even a small rate cut can lower your monthly payments and help you save more over the full loan term.

To Conclude

It is expected that Personal Loan interest rates will remain stable for the time being, with a possibility of minor reductions later this year. As a borrower, rather than hedging your decisions on rate changes, focus on strengthening your credit profile to secure the best possible terms. Use handy tools like the Personal Loan EMI Calculator to see if you can afford your dream loan with your ideal tenure.

Check out Poonawalla Fincorp’s Instant Online Loan for a quick loan approval process with minimal documentation.

Frequently Asked Questions

Will Personal Loan interest rates decrease in India this year?

Current forecasts suggest that rates will stay steady for now. A cut may happen later in the year if inflation stays within the RBI’s target range and the economy remains stable.

What is the primary factor that affects Personal Loan interest rates?

The repo rate, set by the RBI, is the main factor. It is the rate at which the Reserve Bank lends money to banks and NBFCs. Whenever the repo rate is affected, there is a direct bearing on the cost of funds of the lenders, which plays an important role in the rates of interest that lenders offer to their customers.

Does my CIBIL score affect the interest rate I am offered?

Yes, your CIBIL score is a very important indicator of your creditworthiness. A higher score (usually above 750) demonstrates to lenders that you are a low-risk borrower who is usually offered a more competitive interest rate at a level lower than that offered to others.

Is it a good time to take a Personal Loan now, or should I wait for rates to drop?

With rates stable, taking a loan now is a safe choice. You could wait for a small rate cut later, but it may not be worth the delay since the timing is uncertain. It’s better to focus on improving your eligibility to get the best rate today.

How can I get a lower interest rate on my Personal Loan?

You can improve your chances by keeping a high credit score, maintaining a clean repayment record, and ensuring a low debt-to-income ratio. Comparing offers from different lenders can also help you secure better terms.

What is the difference between a fixed and a floating interest rate?

The principal EMI amount with a fixed interest rate remains fixed throughout the entire tenure, i.e., till the last instalment of the loan is paid. If the interest rate is floating, then this is associated with a benchmark rate, and any changes are observed when the RBI changes its policy. Thus, EMI paid under a floating-rate scheme could be increased or decreased based on current market policy.

Can I negotiate the interest rate on a Personal Loan?

While the advertised rates have limited room for negotiation, lenders often have different rate bands based on a borrower's risk profile. You can’t negotiate directly, but having a high credit score and a stable income improves your chances of getting the best rate from lenders.

How does the RBI’s repo rate impact my loan EMI?

When the repo rate is cut, it lowers the cost of borrowing for the lenders. Lenders can pass this reduction in rate onto the new borrowers or those with floating interest rate loans, thus lowering the interest rate and EMI. Holders of fixed-interest-rate loans would remain unaffected, so their EMIs will remain the same.

How long does it take for banks to pass on a repo rate cut to customers?

The rate cut transmission does not happen instantaneously. For new loans, lenders may adjust their rates within a few weeks. For existing floating-rate loans, however, interest rates are reset at specific intervals (e.g., quarterly or half-yearly), so you actually start seeing the benefit in your EMI post the next reset date.

Are interest rate predictions always accurate?

Interest rate predictions are informed guesses about the future made by financial experts, based on all available economic data and trends. However, it is never a certainty. The situation could change due to unforeseen economic developments, both domestically and globally, thus forcing the RBI to adjust its course of action.