Bigwigs in corporate circles and even the Finance Minister, seems to be convinced that, now is the time to lower interest rates to spur growth. A rate cut will lift the sentiment and encourage more  corporate and retail consumers to opt for loans. So, amid all this noise for a rate cut, are you curious about what kind of impact it will have on your personal finances? What should you do if you are a potential home loan or auto loan customer, or even a retail investor. Here are some personal finance hacks for you to keep in mind in times like this. 

Good news for borrowers

For those of you who are are home loan shopping, there's good news for you. Home loans could be cheaper if a rate cut is announced. Home loans at a floating rate of interest are trending between 10.4%- 10.9% p.a. Even if you are an existing home owner and pay a floating rate of interest, you can benefit from the rate cut.  If the rate cut is substantial, you can go back to your lender and ask them to trim your EMI component or reduce your loan tenure.  If your bank does not seem too keen on realigning your loan agreement to benefit you more, you can always consider the option of refinancing your loan and move to a bank which is offering you a better rate of interest. The same holds true for automobile loans which range from 10.4 % -15% for new car loans. The one thing you should not, however, do, is increase your budget and bite off more than you can chew. A rate cut, means lower payments, but that should be used as an opportunity to save and not spend more.

Tackle your high cost debt

When interest rates are about to fall, the one thing you should keep in mind are your credit cards, which demand the highest rate of interest. If an interest rate cut is announced by the central bank, the rate of interest on your credit card should come down automatically. If your credit card issuer is not willing to budge on rates or seems to be to taking longer to make a rate cut effective, you should begin to look for other credit cards that offer a cheaper rate of interest.

Look towards bonds for better savings

An interest rate cut is not good news for those who still choose to park all their money in fixed deposits. In early September, State Bank of India, India's largest commercial bank cut its deposit rate up 1% across all maturities.  Sooner than later, all other banks are expected to follow suit. The wise thing to do now therefore is to look for other attractive investment avenues. Several long-term debt funds have given stellar returns in the past three to six month period. In recent times, the bond market has begun to factor in the fall in inflation and a subsequent rate cut. As a result, the benchmark bond yield is now hovering around 8.4 percent, which is a sharp decrease from 9% in April this year. This is, therefore, a good time to make an entry into long-term debt funds to make the most of a bond rally.

A change in interest rate regime is not only important for the economy, it has a major role to play in your personal finances as well. Keeping a track on the interest rate decisions and planning ahead of a rate cut, will help you keep your finances in ship shape and yield the best returns on your portfolio.

(Contributed by Rajiv Raj, director and co-founder at Creditvidya.com)