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MCLR VS RLLR: Know Which Home Loan Is Better For You?

By Tata Capital
12 December 2025
9 mins read
1826

If you’re getting a home, you’re probably considering going with a lender offering a lower home loan rate. After all, a lower home loan rate typically translates to lower EMIs, ergo easier loan repayments. Besides, it helps you save on the total amount you spend on interest on these long-term loans too!

But here’s the thing. Selecting a home loan scheme based on interest rates gets complex pretty quickly. The reason? Lenders typically will offer you two types of loans: MCLR-based home loans or RRLR-based home loans.

But what is RLLR rate and MCLR in the first place, and how do they differ from one another? More importantly, how do you make the right choice? Continue reading to find out!

In this article we will explain MCLR meaning, RLLR meaning, and discuss how both these rates affect your home loan journey.

What is the MCLR interest rate, MCLR meaning, and MCLR full form?

In simple terms, the MCLR, or the Marginal Cost of Funds Based Lending Rate, is the lowest interest rate a lender can offer. It typically considers factors like your loan tenure, the repo rate (the rate at which commercial banks borrow money from RBI), Marginal Cost of Fund, Cash Reserve Ratio, Tenor Premium, Operating Costs, etc.

This means, if you opt for an MCLR-based home loan on a floating interest rate, the loan interest will change depending on the prevailing repo rate and other factors. What’s more, these changes come into effect after a specific term called a reset period, ranging from 6 months to a year.

So, why should you opt for MCLR interest rate as a borrower? Well, the MCLR rate is lower than the base rate of interest offered by most lenders, given the considered repo rates while calculating the marginal cost of funds. So, they are a great choice if you’re looking to lower your home loan interest.

Also, read – Understanding the Down Payment for a Home Loan

What is the RLLR rate, RLLR full form, and RLLR meaning?

Now that you know what is MCLR rate, and what is MCLR in loan, its time to understand RLLR. RLLR or Repo Linked Loan Rate is by definition, a lending rate that depends on the repo rate. That said, a few other factors that influence the RLLR include the loan to value ratio, the risk of the borrower, and more. Put simply, if the repo rate increases the RLLR increases and vice versa. Additionally, the RRLR changes immediately as and when the repo rate changes.

Key features of MCLR and RRLR

Having discussed what is MCLR rate, what is MCLR in loan, and what is RLLR, let’s take a look at their features.

1. Benchmark linking

MCLR has internal linking, which means the lenders decide after considering their own costs. The repo rate is not the primary determinant of this type of rate.

Repo linked lending rate has external linking, which means with every change in repo rate, the interest rate changes immediately. Lenders or financial institutions only have the freedom to choose their markups, but the repo linked lending rates only get influenced by the repo rate.

2. Reset period

Lenders typically revise their MCLR rates in 6-12 months. This means even if the repo-rate changes, you can benefit from it only after the 6-12 month term.

In the case of repo linked lending rate loans, the interest rates get revised every 3 months, and it will also influence your EMIs.

3. Transmission rate

MCLR interest rates have a longer waiting period, meaning they change slowly. This gives you, the borrower, enough time to adjust to interest rate changes and secure the necessary financing.

In contrast, repo linked lending rates change quickly. This means interest rate changes immediately reflect on your loan EMIs.

Also, read – GST on Flat Purchase and Its Impact on Home Buyers

How MCLR and RLLR Affect Your EMIs

The type of loan interest rate benchmark impacts your EMIs. And so, MCLR and RLLR impact on EMI is something you should consider. Here’s a look at the EMI change due to MCLR, and the EMI change due to RLLR that you should be aware of:

Impact of MCLR on EMIs

Your loan EMIs aren’t affected during the reset duration, which can typically range from 6 to 12 months. Further, if the repo rate changes, the MCLR effect on EMI will only take place after the reset date. In other words, there will be no EMI variation with MCLR. This delayed MCLR interest rate change offer allows you to plan your finances comfortably.

When judging home loan MCLR impact, it’s also important to note that the benefit is not instant when the interest rate falls. As a result, there can be a delay in potential savings.

Impact of RLLR on EMIs

When it comes to RLLR effect on EMI, it’s important to note that EMIs are revised every three months, to stay in sync with RBI’s repo rate changes. If the repo rate falls, your EMI can fall in the subsequent quarter, allowing you to save on interest. In other words, your repo linked loan EMI changes.

Alternatively, there will be a similar RLLR interest rate impact with a hike in repo rate. A rise in repo rate will increase your RLRR home loan EMI too. This change can benefit short term gains, but adversely affect long term financial planning if rates rise often.

Also, read – What is Ready Reckoner Rate?

MCLR vs. RLLR: Which is Better?

We’ve already discussed what is MCLR rate and RLLR rate, what is MCLR in loan and what is RLLR in loan, along with their impact on your EMIs. It’s natural to wonder which is better: MCLR or RLLR. To help you decide, here is MCLR vs RLLR comparison.

Stability

When it comes to RLLR vs MCLR benefits as to stability, MCLR stands out. This is because MCLR offers fixed EMIs for extended periods, allowing for better planning. Alternatively. RLLR changes every three months, which can make budgeting a hassle.

Transparency

The next MCLR vs RLLR basis is transparency. RLLR, being based on a publicly declared repo rate, fosters greater clarity as compared to MCLR, which is internally calculated.

Savings Potential

The last MCLR vs RLLR basis is the amount of savings each can potentially offer. In the case of RLLR, repo rate cuts get immediately translated to lower EMIs, allowing for greater savings. MCLR, on the other hand, doesn’t pass on the benefits immediately. So, when it comes to MCLR vs RLLR interest rate cuts, RLLR can offer greater potential for savings as it passes the benefit instantly.

And that’s our MCLR vs RLLR comparison. Be sure to assess both thoroughly, to find the right one for you.

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How to Calculate RLLR?

You know what is what is MCLR rate, what is MCLR in loan, what is RLLR rate and what is RLLR rate in loan, but how RLLR is calculated? To answer this question, here is the RLLR calculation method. The following repo rate linked loan formula will help you understand RLLR better.

RLLR = Repo Rate + Spread

In the above RLLR interest rate formula, repo rate refers to the current rate set by the RBI, and the Spread is added by the lender to compensate for operational margins and risks.

Which option should you take?

Choosing between the two types of interests will be based on a number of personal elements that you will have to assess, examine, and reach a conclusion. You may, however, be able to decide which is better based on some comparisons between them.

1. Transparency

The MCLR rate and its computation are a lender’s internal business. This means you might find it difficult to understand the exact reasons for a particular interest rate. In contrast, repo linked lending rate is available publicly to everyone. Naturally, they are the better choice if you care about interest rate transparency.

2. Stability

In terms of stability, MCLR loan rates are a better option. Why? Because repo linked interest rates change with every shift in the repo rate, making it inconvenient for borrowers like you to arrange for finances in case of a rate increase. MCLR loan rates, on the other hand, shift slowly. Hence, you have a longer period to arrange for finances in the rare case that interest rates shoot up dramatically.

3. Savings

Since home loans have long tenures, it’s suitable to get a loan at a low interest rate to get maximum savings. And you can do this best by opting for a repo linked interest rate. When you choose a repo rate linked home loan interest rate, your interest rate decreases drastically as the repo rate falls. This means you get to pay smaller EMIs.

In contrast, a dip in repo rates may not affect your MCLR rate-dependent home loans at all. Naturally, repo linked loan lending rates are the obvious choice if you want to save on loan interest.

Key takeaways

The table below offers a quick comparison of MCLR and RLLR:

Feature	MCLR	RLLR	Key Takeaway for the borrower
Benchmark linking	Internal linking, lenders decide the rate.	Depends on the current repo rate.	RLLR offers more transparency.
Reset period	Revised every 6-12 months	Revised every 3 months	If repo rates fall, your EMIs will become smaller and you may be able to save more on interest payments in the case of RLLR.
Transmission rate	Take a long time to change	Change quickly	MCLR-dependent loan schemes are more stable.

Now it’s your turn

By this time, you know what is MCLR rate, what is MCLR in loan, MCLR full form, RLLR full form, how they work, and how they impact you. Now, you have all the information, and you need to make a choice. But if you’re still over the edge, speak with your lender about both options. Oftentimes, you might find MCLR loan rates and repo linked lending rates stack up differently depending on your lender and whether you are a first-time or a recurrent borrower.
If you’re looking for a lending partner to get your housing loan, look no further. We, at Tata Capital, provide both types of house loans. And the best part? Our home loans start at a competitive interest rate of 6.85%. Visit our website to learn more.

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FAQs

What is the full form of MCLR?

MCLR stands for Marginal Cost of Funds Lending Rate and signifies the minimum interest rate below which banks cannot offer home loans. It is calculated using several factors, such as repo rate, Marginal Cost of Funds, Cash Reserve Ratio, etc.

What is the full form of RLLR?

RLLR stands for Repo Linked Lending Rate. It is a floating interest rate that directly depends on the RBI’s repo rate. Since it is calculated using an external benchmark set by the RBI, an RLLR home loan reflects repo rate changes instantly.

What is the current MCLR rate by the RBI?

While MCLR differs by lenders, the RBI’s overnight rate (for one-day loans) is 7.95-8.20% as of July 2025. To understand which is better between MCLR or repo rate for your home loan, check your bank’s website.

What is the current RLLR rate?

The RLLR rate varies across financial institutions. However, if you are comparing a home loan based on repo rate vs MCLR, the RBI’s benchmark as of July 2025 stands at 5.50%.

Which one is better: MCLR or RLLR?

When deciding which is better between an MCLR or RLLR home loan, consider interest trends. RLLR is more transparent but reactive to repo rate changes, making it suitable for periods of falling rates. In contrast, MCLR’s reset period of 6-12 months offers stability during rising-rate cycles.

Are all home loans linked to the repo rate?

No, not all home loans are linked to the repo rate. However, floating interest home loans, such as RLLR and MCLR, are. RLLR tracks the repo rate directly, while MCLR includes other factors such as the marginal cost of funds. Understanding which is better between an MCLR and repo rate loan depends on your comfort with fluctuations.

What is the reset period for MCLR and RLLR loans?

The reset period for MCLR is 6 to 12 months. The reset period for RLLR is 3 months.

Which home loan interest rate offers better transparency?

Since the MCLR rate and its calculation is the lender’s internal business, it offers limited transparency. RLLR, on the other hand, is based on the repo rate that is publicly available, making it much more transparent.

How do MCLR and RLLR affect monthly EMIs?

RLLR affects your monthly EMIs every three months, in sync with the repo rate changes. On the other hand, the MCLR keeps your EMIs constant during the reset period (6-12 months) after the repo rate changes.

Should I choose MCLR or RLLR based home loan?

Whether you should choose MCLR or RLLR, depends on your specific situation. While MCLR rate offers better stability, RLLR provides greater transparency and savings.

Is RLLR more volatile than MCLR?

Yes, RLLR can be considered more volatile as compared to MCLR as it changes every 3 months, along with the repo rate.

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