Last week, the country's largest bank, State Bank of India (SBI) has decided to reduce the interest rate burden on existing home loan borrowers by allowing them to switch to a lower interest rate.
The new rate is in the range from 10.75 to 11.25% pa, depending on the loan tenor.
But you must pay a fee of 1% for the contact.
"This step will help to lower interest rates by as much as 300 basis points (bp) (100 basis points is 1 percentage point) to some existing borrowers," a senior SBI official said on condition of anonymity. "On average it will reduce the number of 150-200 bps." The move would primarily help those still on the older benchmark prime lending rate (BPLR) regime, the official added. http://www.hindustantimes.com/Images/Popup/2012/4/07_04_biz4.jpg ~ ~ V
The move was probably also benefit those who took the teaser loans, experts say. "Those who took the teaser loan will see their loans shifts from about 8% down in 2009 to some 12% floats on the current level," says
There is a good possibility that the interest you pay from now on is about 12.75% pa, plus minus 50-75 bps.
"If you currently pay a rate of 10.75% pa, it definitely makes sense to switch the loan to another lender, regardless of the loan amount," said Harsh Roongta, CEO, Apnapaisa.com, a loan portal. "Especially now, when lenders do not charge a prepayment fee, while changing a variable rate loan. If you get better prices, there is no reason to continue at higher speeds. There are (BPLR) borrowers who are still paying over 14% pa "Competitive prices. Many banks offer competitive prices as of now.
"The rates offered across the banking sector is in the range from 10.50 to 10.75% for loans below Rs 30 lakh and 10.75 to 11.25% for loans over RS 30 lakh," said Vipul Patel, Director, Home Loan Advisors.
Last week, IDBI Bank reduced its home loan rates by 75 bps, with new courses to be in the range from 10.75 to 11.50% pa. Canara Bank also reduced its rates for new borrowers by 175 bps recently.
SBI offers: Although it is best to switch to a lender offering a lower rate if you want to continue with the bank, it is better to take the offer, even after paying the conversion fee (see graph). If you wish to continue with your lender by the borrower, see what price you can negotiate also try to negotiate a lower conversion fee if your lender charges any.
What should you do?
Look at the expense: While the switch, remember to take into account the total cost of the old loan and new loan. "While changing the loan taking into account switching costs," said Shetty. "The interest rate is an important parameter. Also treatment charges for the new lender must be considered." There are lenders who charge a fixed service charge of Rs 5000-10000 and change can work in such cases.
The existing lender does not want to let go of a good borrower, while the new lender would be open to negotiate fees. "If you have been a good borrower, there is a good possibility that the new lender may waive the processing fee on your loan in full, and change would be at no cost," said Roongta.
Do not wait for rate cuts: While everyone expects rates begin to fall soon, nobody can say exactly when that would happen for sure. "Why would you wait for prices to come down and pay more until then," said Roongta. "Even if you switch now and rates fall later, you will benefit from the fallen rate later." To stick with your current lender or abandon it for a new one is your call because you have to do detailed paperwork again. If you decide to change, we shop around, negotiate hard on prices and fees before you make this contact.
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Monday, April 9, 2012
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