How does MCLR affect fixed rate loans?

MCLR (Marginal Cost of Funds Based Lending Rate) primarily applies to floating rate loans, as it serves as the benchmark for determining the lending rates. However, it's important to note that fixed rate loans are not directly influenced by changes in the MCLR rate.

In the case of fixed rate loans, the interest rate remains fixed throughout the loan tenure, regardless of any changes in the MCLR rate. The fixed rate is determined at the time of loan disbursal and remains constant, providing borrowers with the certainty of consistent EMIs (Equated Monthly Installments) over the loan term.

However, it's worth mentioning that banks consider various factors, including their cost of funds and prevailing market conditions, when determining the fixed interest rate for loans. While changes in the MCLR may not directly impact fixed rate loans, banks' overall cost of funds may be influenced by changes in market rates, which could indirectly impact the interest rates they offer on fixed rate loans.

It's advisable for borrowers to carefully evaluate the terms and conditions of fixed rate loans, including the specific interest rate offered and any associated charges, to make informed decisions about their borrowing costs and repayment obligations.