New Delhi33 minutes ago
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Housing finance has cut home loan interest rates by 0.50%. Now LIC’s home loan interest rates will start from 7.50% annually. RBI has recently reduced the repo rate from 6.00% to 5.50%. After which banks have also started cutting loan interest rates. Earlier, SBI, Union Bank and Punjab National Bank have also cut loans interest rates.
This interest rate deduction will benefit all those whose loan repo linked lending rate (RLR) …
- For new loans takers: If you are thinking of taking a new home loan, now you have to pay less interest. For example, the interest rate of SBI new home loan started earlier at 8%, now it will decrease to about 7.50%.
- For old loans: Those who have already taken floating rate home loan related to RLLR, their interest rate will also be reduced in the next reset period. This will either reduce their EMI, or the loan duration will decrease. If the loan is connected to a fixed rate, then you will not get the benefit.
If the repo rate is low, RLR also decreases
Banks fix their loan interest rate based on RLR. If the repo rate is low, the RLR also decreases, and the interest rates of the loan also decrease. The bank adds a margin above the repo rate in the RLR, so that their expenses and profits can be covered.
Example:
- Suppose the repo rate of the Reserve Bank is 5.50% and the bank adds 2.65% margin, then the RLR will be 8.15%.
- Credit risk premium is added to the RLLR to fix the interest rate, which is based on the credit profile.
- If the RLR is 8% and your credit risk premium is 0.5%, then your home loan interest rate will be 8.5%.
Now answers to two important questions …
1. Question: Will you get the same benefit on both old and new loans?
answer: According to RBI rules, it is necessary to reset the floating rate loan from time to time according to the repo rate. This means that the interest rate of those who have already taken the loan will automatically reduce, because the bank has to pay the benefit of decreasing the repo rate. However, those taking new loans may not get full benefit. This is because banks can increase the extra margin above the repo rate to save their profits.
2. Question: Can you switch to floating with old loans?
answer: If your loan is connected to MCLR or fixed rate, you can talk to the bank and switch it to RLR. However, some fees may have to be paid for this. If your loan is currently in the initial years, switching can save interest in a long time.
Repo rate reduced by 3 times this year, 1% cut The RBI had reduced the interest rates from 6.5% to 6.25% at the meeting held in February. This deduction was done by the Monetary Policy Committee after about 5 years. The interest rate was reduced by 0.25% in the meeting held in April for the second time. Now the rates have been cut for the third time. That is, the Monetary Policy Committee has reduced interest rates by 1% at three times.
Keep these 3 things in mind while taking a home loan
1. Take information about pre-payment penalty Many banks impose penalty on paying loan ahead of time. In such a situation, take full details about this from banks, because banks get less interest as expected when they pay the loan ahead of time. In such a situation, some term adams are put on their behalf. Therefore, while taking a home loan, get complete information about this.
2. Take care of your CIBIL score The CIBIL score reveals a person’s credit history. In the case of personal loan, banks definitely see the civil score of the applicant. Credit score is decided by several special credit profiles.
It is seen that you have taken a loan before or how the credit card etc. has been used. Any person’s credit score shows the ratio of history, credit use ratio, existing loans and timely payment of bills. The score is in the range of 300-900, but the score of 700 or more consider the score of 700 or more.
3. Take care of offers Banks continue to provide better offers to those taking loans from time to time. In such a situation, you should find out about the offers of all banks before taking a loan. Because taking a loan in a hurry can prove to be wrong for you. Check properly before taking a loan.
